BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1076|
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THIRD READING
Bill No: SB 1076
Author: Hernandez (D)
Amended: 4/18/16
Vote: 21
SENATE HEALTH COMMITTEE: 8-1, 4/13/16
AYES: Hernandez, Hall, Mitchell, Monning, Nielsen, Pan, Roth,
Wolk
NOES: Nguyen
SENATE APPROPRIATIONS COMMITTEE: 6-1, 5/2/16
AYES: Lara, Beall, Hill, McGuire, Mendoza, Nielsen
NOES: Bates
SUBJECT: General acute care hospitals: observation services
SOURCE: California Nurses Association
DIGEST: This bill 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 when they are
receiving observation services in an inpatient unit of the
hospital, and requiring data on observation services to be
reported separately from other outpatient services to the Office
of Statewide Health Planning and Development.
ANALYSIS:
Existing law:
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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
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
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outpatient services provided by a general acute care hospital,
and that have been ordered by a provider, 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)Defines "observation unit," for purposes of this bill, as an
area in which observation services are provided in a setting
outside of any inpatient unit and that is not part of an
emergency department of a general acute care hospital.
3)Permits a hospital to establish an observation unit, and
requires these units to be marked with signage identifying the
unit as an outpatient area to indicate clearly to all patients
and family members that the observation services are not
inpatient services. Requires observation services provided in
an outpatient observation unit to comply with the same
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.
4)Specifies that identifying an observation unit by another name
or term does not exempt the hospital from compliance with the
staffing and signage requirements in 3) above.
5)Requires a patient, when he or she is receiving observation
services in an inpatient or observation unit of a hospital, to
receive written notice as soon as practicable that he or she
is on observation status, and that while on observation
status, the patient's care is being provided on an outpatient
basis, which may affect his or her health care coverage
reimbursement.
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
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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.
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
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.
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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, the Center for Medicare
and Medicaid Services (CMS) 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
CMS pushing 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 of Observation, Treatment, and Implication for
Care Eligibility (NOTICE) Act. Federal legislation passed last
year, the 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
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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.
Prior Legislation
SJR 8 (Hernandez, Resolution Chapter 135, 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 OSHPD. SB 483
was held on the Senate Appropriations Committee Suspense File.
SB 1269 (Beall, 2014) was very similar to SB 483. SB 1269 was
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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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Senate Appropriations Committee:
Ongoing costs, less than $50,000 per year, for additional
licensing enforcement activity by the CDPH and Los Angeles
County (Licensing and Certification Fund). Under this bill,
the CDPH (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 OSHPD to amend existing regulations,
update data reporting tools, and audit data reported by
hospitals under this bill (California Health Data and Planning
Fund). This bill requires 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.
SUPPORT: (Verified5/4/16)
California Nurses Association (source)
California Alliance for Retired Americans
California Labor Federation
California Psychiatric Association
California School Employees Association
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OPPOSITION: (Verified5/4/16)
Tenet Health
ARGUMENTS IN 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 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
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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.
ARGUMENTS IN OPPOSITION: Tenet Health 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.
Prepared by:Vince Marchand / HEALTH /
5/4/16 15:04:17
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