BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 1076 (Hernandez) - General acute care hospitals:  observation  
          services
          
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          |Version: April 18, 2016         |Policy Vote: HEALTH 8 - 1       |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 2, 2016       |Consultant: Brendan McCarthy    |
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          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  







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            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  








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          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  








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          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.





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