BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1076
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|AUTHOR: |Hernandez |
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|VERSION: |February 16, 2016 |
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|HEARING DATE: |April 13, 2016 | | |
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|CONSULTANT: |Vince Marchand |
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SUBJECT : General acute care hospitals: observation services
SUMMARY : Establishes new requirements for observation services provided
by a hospital, including that observation services provided in
an outpatient observation unit comply with the same
nurse-to-patient ratios as emergency services, requiring
patients to receive written notice immediately upon placement
into observation status, and requiring data on observation
services to be reported separately from other outpatient
services to the Office of Statewide Health Planning and
Development.
Existing law:
1)Licenses general acute care hospitals under the California
Department of Public Health (CDPH). Defines general acute care
hospitals as hospitals that provide 24-hour inpatient care,
including the following basic services: medical, nursing,
surgical, anesthesia, laboratory, radiology, pharmacy, and
dietary services.
2)Permits general acute care hospitals, in addition to the basic
services all hospitals are required to offer, to be approved
by CDPH to offer special services, including, but not limited
to, a radiation therapy department, a burn center, an
emergency center, a hemodialysis center or unit, psychiatric
services, intensive care newborn nursery, cardiac surgery,
cardiac catheterization laboratory, and renal transplant.
3)Permits general acute care hospitals to apply to CDPH for
approval of supplemental outpatient clinic services. Limits
the outpatient clinic services to providing nonemergency
primary health care services in a clinical environment to
patients who remain in the outpatient clinic for less than 24
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hours.
4)Requires CDPH to adopt regulations that establish
nurse-to-patient ratios by hospital unit for all general acute
care hospitals. Defines "hospital unit" as a critical care
unit, burn unit, labor and delivery room, post-anesthesia
service area, emergency department, operating room, pediatric
unit, step-down/intermediate care unit, specialty care unit,
telemetry unit, general medical care unit, subacute care unit,
and transitional inpatient care unit.
5)Establishes the Office of Statewide Health Planning and
Development (OSHPD), and designates OSHPD as the single state
agency to collect specified health facility or clinic data for
use by all state agencies. Requires hospitals to make
specified reports to OSHPD, including quarterly summary
financial and utilization data that includes the number of
discharges, the number of inpatient days, the number of
outpatient visits, total operating expenses, and inpatient and
outpatient gross revenues by payer.
This bill:
1)Defines "observation services," for purposes of this bill, as
outpatient services provided by a general acute care hospital
to those patients who have unstable or uncertain conditions
potentially serious enough to warrant close observation, but
not so serious as to warrant inpatient admission to the
hospital. Permits observation services to include the use of a
bed, monitoring by nursing and other staff, and any other
services that are reasonable and necessary to safely evaluate
a patient's condition or determine the need for a possible
inpatient admission to the hospital.
2)Requires observation services provided by a general acute care
hospital in an outpatient observation unit, including the
services provided in a freestanding physical plant, to comply
with the same staffing standards, including licensed
nurse-to-patient ratios, as supplemental emergency services,
notwithstanding provisions of law that prohibit the state from
enforcing higher standards for outpatient services located in
a freestanding physical plant of a hospital than is required
for licensed clinics.
3)Requires a patient receiving observation services to receive
written notice immediately upon admission for observation
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services or placement into observation status, or immediately
following a change from inpatient status to observation
status, that his or her care is being provided on an
outpatient basis, and that this may affect reimbursement by
Medicare, Medi-Cal, or private payers of health care services,
or cost-sharing arrangements through his or her health care
coverage.
4)Requires observation units not provided in inpatient beds or
attached to emergency services to be marked with signage
identifying the area as an outpatient area. Requires this
signage to use the term "outpatient" in the title of the
designated area to indicate clearly to all patients and family
members that the observation services provided in the center
are not inpatient services.
5)Requires observation services to be deemed outpatient or
ambulatory services that are revenue-producing cost centers
associated with hospital-based or satellite services locations
that emphasize outpatient care. Specifies that identifying an
observation unit by another name or term does not exempt the
general acute care hospital from compliance with the
requirements of this provision.
6)Revises OSHPD reporting requirements to require hospitals to
exclude observation service visits from the number of
outpatient visits that they report to OSHPD, and instead
separately report the number of observation service visits and
number of hours of observation services provided. Requires
hospitals to also report total observation service gross
revenues by payer, including Medicare, Medi-Cal, county
indigent programs, other third parties, and other payers.
FISCAL
EFFECT : This bill has not been analyzed by a fiscal committee.
COMMENTS :
1)Author's statement. According to the author, this bill is
intended to address problems associated with the growing trend
of patients being treated under "observation status," as an
outpatient, for extended periods of time. Outpatient services
are not subject to many of the laws and regulations designed
to ensure patient safety and adequate staffing standards in
acute care hospitals. Often, patients are not even aware they
have not been admitted to the hospital, even when they have
SB 1076 (Hernandez) Page 4 of ?
been moved outside of the emergency room into a hospital bed
and kept overnight. Additionally, hospitals are not required
to report data to the state on observation service
utilization, which leaves the public with a lack of
information on how often and for what reasons outpatient
observation services are used.
2)Medicare's two-midnight rule. California law has long drawn a
distinction between outpatient medical care, which is care
provided for less than 24 hours, and inpatient medical care,
which is when a patient is formally admitted and will be
spending at least one night in the hospital. However,
third-party payers are increasingly unwilling to authorize
inpatient admissions for patients who are not expected to have
an extended stay at the hospital, and asking instead that
these patients be kept in the hospital under "observation," as
an outpatient. This has been driven, in part, by a Medicare
policy known as the "two-midnight rule," which states that
inpatient admission, and therefore payment under Medicare Part
A, is generally only appropriate when the physician expects
the patient to require a stay that crosses at least two
midnights and admits the patient based on that expectation. If
the physician does not expect the patient to stay in the
hospital for at least two midnights, the expectation is that
the patient will be treated as an outpatient, under
"observation," and Medicare will reimburse providers under
Part B.
This has been very controversial within the hospital community.
The rule had been enforced by contractor audits that reviewed
records of patients, and revoked payment for inpatient stays
that did not meet the two-midnight rule. In response to
numerous complaints, in early 2014, announced that it would
delay enforcement of the rule through September 2014, and this
delay was subsequently extended several times. Beginning in
January of this year, enforcement by recovery audits could
proceed, but only for those hospitals that have been referred
by a Quality Improvement Organization as exhibiting persistent
noncompliance with the two-midnight rule.
The two-midnight rule has had a number of repercussions. One
issue that has been widely reported is that in order to
qualify for skilled nursing care, Medicare beneficiaries have
to spend three days in the hospital as an inpatient. With the
Center for Medicare and Medicaid Services (CMS) pushing
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hospitals to treat shorter-stay patients as outpatients under
"observation," many Medicare patients are finding that one or
more of their days spent in the hospital was as an outpatient,
and despite spending more than three days in the hospital, are
not qualified to receive skilled nursing care upon discharge.
Additionally, if services received in a hospital are billed
under Part B as an outpatient, the Medicare beneficiary is
likely to have to shoulder much higher out-of-pocket costs.
Finally, many hospitals and other providers are reporting that
observation care is increasing across all types of payers, not
just for Medicare patients. Medicare is frequently a
trend-setter, and may be setting a trend of increasing use of
outpatient "observation care," even for patients who spend 48
hours or more in a hospital.
3)Federal NOTICE Act. Federal legislation passed last year, the
Notice of Observation, Treatment, and Implication for Care
Eligibility (NOTICE) Act, requires Medicare patients to be
notified when they are being held for observation rather than
admitted. Under the NOTICE Act, the hospital is required to
give each individual Medicare patient who receives observation
services as an outpatient for more than 24 hours an adequate
oral and written notification within 36 hours after the
beginning of the observation service. Requires this oral and
written notification to:
a) Explain the individual's status as an outpatient and
not as an inpatient and the reasons why;
b) Explain the implications of that status on services
furnished (including those furnished as an inpatient), in
particular the implications for cost-sharing requirements
and subsequent coverage eligibility for services
furnished by a skilled nursing facility;
c) Include appropriate additional information;
d) Be written and formatted using plain language and
made available in appropriate languages; and,
e) Be signed by the individual or a person acting on
the individual's behalf to acknowledge receipt of the
notification.
The NOTICE Act is scheduled to take effect in August of this
year, and CMS is currently preparing rulemaking to implement
this law.
4)Prior legislation. SJR 8 (Hernandez, Resolution Chapter 135,
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Statutes of 2015), urged Congress and the President of the
United States to reform short stay hospital admissions
criteria to more accurately reflect the clinical needs of a
patient as determined by a physician and to discontinue the
so-called "two-midnight rule."
SB 483 (Beall, 2015), would have required a general acute care
hospital that provides observation services in an observation
unit, as defined, to apply for approval from the CDPH for
observation services as a supplemental service, as specified;
limited observation services in an observation unit to 24
hours; required observation services in an observation unit to
have the same staffing requirements as emergency services;
and, required hospitals to report observation service data to
the Office of Statewide Health Planning and Development. SB
483 was held on the Senate Appropriations Committee Suspense
File.
SB 1269 (Beall, 2014) was very similar to SB 483. SB 1269 was
held on the Senate Appropriations Committee Suspense File.
SB 1238 (Hernandez, 2014), would have required an outpatient
to either be discharged or admitted to inpatient status after
no more than 24 hours, but permitted an outpatient stay of
longer than 24 hours when discharge was imminent under certain
specified circumstances, including when admission to inpatient
status would directly conflict with federal Medicare
reimbursement requirements. SB 1238 was held on the Senate
Appropriations Committee Suspense File.
5)Support. This bill is sponsored by the California Nurses
Association (CNA), which states that more and more, hospitals
are placing patients who cannot be safely discharged to their
homes in "observation units" as an alternative to hospital
admission. CNA states that many patients are not aware that
they are in observation, leaving them to believe they are
admitted as inpatients. According to CNA, outpatient units are
not subject to many of the laws and regulations designed to
ensure patient safety and adequate staffing standards.
Additionally, CNA states that hospitals are not required to
report data to the state on observation service utilization,
which leaves the public with a dearth of information on how
often and for what reasons outpatient observation services are
used. CNA states that this bill will address these concerns by
doing the following: requiring hospitals to require
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observation units to meet the nurse-to-patient staffing ratios
as emergency rooms, or the applicable ratio wherever the
observation bed is placed; requiring hospitals to provide
notice to patients that observation services are "outpatient"
and that third-party reimbursement may be impacted; and,
requiring hospitals to report observation services to OSHPD.
The California Labor Federation (CLF) states in support that
hospitals have increased their use of observation services as
a strategy to improve care, contain costs, control
readmissions, and reduce emergency room overcrowding. However,
CLF states that state and federal laws have not kept up with
the dramatic increase in the use of observation units, and
that the impact on patients of the misuse of observation units
can be devastating. Noting that observation services are
considered outpatient care, CLF states that patients can be
billed for every individual service, test and drug provided,
rather than just paying a single co-pay for inpatient care
that includes all services, and that patients might not even
know they are in observation.
6)Opposition. This bill is opposed by the California Chapter of
the American College of Emergency Physicians (CalACEP), which
states that this bill requires that a patient receive notice
that they are receiving observation services immediately upon
receiving those services, which is inconsistent with the
federal NOTICE Act and therefore sets up a conflict. CalACEP
states that requiring notification at the moment a patient's
status is changed is onerous and difficult to implement in the
emergency department, and that this measure will place
additional stress on California's overcrowded and burdened
emergency departments.
7)Oppose unless amended. The California Hospital Association
(CHA) is opposed to this bill unless amended, stating that the
decision for inpatient hospital admission is a complex medical
decision based on the physician's judgment and the patient's
medical care needs. CHA points out that the federal NOTICE Act
will take effect in July, which will require hospitals to
provide written notification and a related oral explanation to
beneficiaries receiving outpatient observation services, and
strongly believes any notification requirement should be
consistent with forthcoming standards for the NOTICE Act. CHA
states that this bill should be amended to specify that
observation services begin when it is ordered by a provider
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according to hospital policy, modify the required notification
to the patient that they are on "observation status" and that
it could impact their coverage reimbursement, and make other
clarifying changes.
Tenet Health also opposes this bill unless amended, stating that
it would add additional and potentially conflicting rules that
Medicare is currently contemplating regarding the use of
observation, which is required by Medicare for many short-stay
patients. Tenet states that it has been lobbying the federal
government to change the current "two-midnight rule" that is
the root of the spike in observation, and that it believes the
federal rule often supplants clinical decisions relating to
the appropriateness of hospital admissions. Tenet states that
it does not believe that adding additional, duplicative
mandates on hospitals here does anything to solve the
observation dilemma. Tenet states that any state notice follow
CMS requirements and is implemented subsequent to the
implementation of the Medicare notice, so hospitals do not
have to provide two separate notices. Tenet also considers
observation unit requirements in this bill to be unnecessary
in light of already-existing requirements permitting hospitals
to request program flex for an observation unit that is
located in a separate physical location from the emergency
room or other units of the hospital. Finally, Tenet states
that it supports inclusion, as part of the "Other Utilization
Statistics," of the already collected observation hours that
are reported through financial reporting forms, rather than
the new reporting requirements in this bill.
SUPPORT AND OPPOSITION :
Support: California Nurses Association (sponsor)
California Labor Federation
California Psychiatric Association
California School Employees Association
Oppose: California Chapter of the American College of
Emergency Physicians
California Hospital Association (unless amended)
Tenet Health (unless amended)
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