BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 1076 (Hernandez) - General acute care hospitals: observation services ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 18, 2016 |Policy Vote: HEALTH 8 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 2, 2016 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- This bill does not meet the criteria for referral to the Suspense File. Bill Summary: SB 1076 would establish new requirements on hospitals relating to observation services. Fiscal Impact: Ongoing costs, less than $50,000 per year, for additional licensing enforcement activity by the Department of Public Health and Los Angeles County (Licensing and Certification Fund). Under the bill, the Department (and Los Angeles County, under contract with the state) would experience a minor increase in workload when performing licensing surveys of hospitals that provide observation services. Ongoing costs of $100,000 per year (and an additional $10,000 in the first year) for the Office of Statewide Health Planning and Development to amend existing regulations, update data reporting tools, and audit data reported by hospitals under SB 1076 (Hernandez) Page 1 of ? the bill (California Health Data and Planning Fund). The bill would require hospitals that provide observation services to include specific data on observation services as part of the existing requirement for hospitals to report certain data to the state. 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 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 coinsurance) 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 SB 1076 (Hernandez) Page 2 of ? 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 1076 would establish new requirements on hospitals relating to observation services. Specific provisions of the bill would: Define observation services; Require hospitals to provide notification to a patient who is receiving observation services; Authorize hospitals to establish observation units, with specified requirements; Require observation units to comply with the same nurse-to-patient ratios required for supplemental emergency services; Require hospitals to include information on observation service visits and gross revenues in the data they are currently required to report to the Office of Statewide Health Planning and Development. Related Legislation: SB 483 (Beall, 2015) would have prohibited hospitals from providing "observation services" for more than 24 hours and would have imposed specified regulatory requirements on hospitals that provide observation services in an observation unit. That bill was held on this committee's Suspense File. SB 1269 (Beall, 2014) was substantially similar to SB 483 (Beall, 2015). That bill was held on this committee's Suspense File. SB 1238 (Hernandez, 2014) would have generally required an outpatient to either be discharged or admitted to the hospital after no more than 24 hours. That bill was held on this committee's Suspense File. Staff SB 1076 (Hernandez) Page 3 of ? Comments: 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. -- END --