BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 483 (Beall) - General acute care hospitals: observation
services
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|Version: May 4, 2015 |Policy Vote: HEALTH 6 - 2 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: May 18, 2015 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 483 would prohibit hospitals from providing "observation
services" for more than 24 hours. The bill would impose
specified regulatory requirements on hospitals that provide
observation services in an observation unit.
Fiscal
Impact:
One-time costs of $250,000 over two years for the Department
of Public Health to develop and adopt regulations to govern
the provision of observation services in an observation unit
of a hospital (Licensing and Certification Program Fund).
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Licensing and regulatory costs of about $1 million over two
years for the initial licensing of new observation units by
the Department of Public Health (Licensing and Certification
Fund). In subsequent years, licensing and enforcement costs
should be absorbable within existing regulatory workload.
Given the widespread practice of providing observation
services in hospitals, the Department anticipates that most
general acute care hospitals would apply to the Department to
be authorized to provide observation services in an
observation unit. Therefore, the Department anticipates
significant additional licensing activity under the bill.
Licensing and regulatory costs of about $300,000 over two
years for the initial licensing of new observation units by
Los Angeles County (Licensing and Certification Fund). Under
current practice, the state contracts with Los Angeles County
to conduct licensing and enforcement activities for hospitals
and other health care facilities in Los Angeles County.
Ongoing costs of about $100,000 per year to develop
regulations and audit additional data reported by hospitals
relating to observation unit discharges and financial data by
the Office of Statewide Health Planning and Development
(California Health Data and Planning Fund).
Unknown increase in Medi-Cal spending for hospital services
(General Fund and federal funds). (See below.)
Background: Under current law, general acute care hospitals are licensed
by the Department of Public Health. (The state contracts with
Los Angeles County to perform licensing activities in Los
Angeles County.) Licensed general acute care hospitals are
authorized to provide 24-hour inpatient care with a variety of
basic medical services. In addition, hospitals can apply to
offer special services such as an emergency services,
psychiatric services, cardiac surgery, and others. Hospitals can
also apply to provide outpatient services.
Historically, when a patient was treated at an emergency
department or underwent a surgical procedure, a physician would
make a determination whether the patient could go home or needed
to be admitted to the hospital as an inpatient for further
observation and/or treatment. Existing regulations define an
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outpatient as someone who has not been formally admitted to a
hospital and who does not remain over 24 hours.
In recent years, hospitals have begun treating patients under
"observation status" or "observation services" in which the
patient is not actually admitted to the hospital as an
inpatient, but is nevertheless given a bed in the hospital and
kept under clinical observation. In part, this trend is being
driven by Medicare and other third-party payers who are refusing
to pay for inpatient admissions under certain circumstances.
This leads to hospitals keeping patients on observation status,
often for more than 24 hours. Under federal Medicare rules, a
beneficiary is only eligible for Medicare-funded skilled nursing
facility care after three days as an inpatient in a hospital. If
a patient was in a hospital for several days, but some of those
days were on observation status, the patient may unknowingly be
ineligible for Medicare payment for the subsequent skilled
nursing care. In addition, the cost sharing that patients are
required to pay (such as copays and deductibles) may differ
depending on whether the patient is an inpatient or an
outpatient. For example, a typical inpatient will be responsible
for a single copay for an inpatient day, whereas a patient who
is being treated as an outpatient may be liable for multiple
copays if his or her health insurance is billed for multiple
individual services provided, rather than a single bill for an
inpatient day.
Proposed Law:
SB 483 would prohibit hospitals from providing "observation
services" for more than 24 hours. The bill would impose
specified regulatory requirements on hospitals that provide
observation services in an observation unit.
Specific provisions of the bill would:
Prohibit hospitals from providing observation services for
more than 24 hours;
Require a hospital that provides observation services in an
observation unit to be licensed by the Department of Public
Health to provide such services as a supplemental service or
a special service;
Require the Department to adopt standards and regulations
for the provision of observation services in an observation
unit;
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Specify the conditions under which a health care provider
can order observation services for a patient;
Require observation services provided in an observation
unit (including one in a free standing building) to meet the
same staffing standards as are required for supplemental
emergency services;
Require notification to patients about their observation
services;
Require observation units to be specifically market by
signage;
Require hospitals that provide observation services to
include data on usage, revenues, and other information as
part of an existing reporting requirement.
Related Legislation:
SB 1269 (Beall, 2014) was substantially similar to this
bill. That bill was held on this committee's Suspense File.
SB 1238 (Hernandez) would have limited the ability of
hospitals to use "observation services" by requiring a
hospital patient to either be discharged or admitted as an
inpatient after no more than 24 hours, with limited
exceptions. That bill was held on this committee's Suspense
File.
SB 631 (Beall, 2013) was substantially similar to this
bill. That bill was held in the Senate Health Committee.
Staff
Comments: Under current practice, the Medi-Cal program does not
recognize observation services as a distinct category. Thus,
when hospitals place a patient on observation status, it is not
clear how they bill Medi-Cal for services. Provided they receive
a treatment authorization from Medi-Cal, hospitals could bill
the program for an inpatient hospitalization day when a patient
is on observation status. Alternatively, hospitals may only be
billing Medi-Cal for outpatient services, which are less costly.
Under the bill, hospitals are likely to admit more patients to
inpatient care. For hospitals that have been billing Medi-Cal
only for outpatient services, this is likely to increase
Medi-Cal costs by shifting those services to more costly
inpatient services. The extent of this impact is unknown.
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The only costs that may be incurred by a local agency relate to
crimes and infractions. Under the California Constitution, such
costs are not reimbursable by the state.
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