BILL ANALYSIS Ó
SB 1076
Page 1
Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 1076
(Hernandez) - As Amended August 1, 2016
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill establishes a definition, disclosure, staffing, and
reporting with respect to "observation services" in a hospital.
Specifically, this bill:
1)Defines observation services as outpatient services to
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.
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2)Requires disclosure that a patient is receiving observation,
as opposed to inpatient, services.
3)Requires observation units, as defined, to meet the same
licensed nurse-to-patient ratios as supplemental emergency
services.
4)Adds data on observation services to information publicly
reported by the Office of Statewide Health Planning and
Development (OSHPD).
FISCAL EFFECT:
1)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.
2)Minor and absorbable costs to OSHPD to add data on observation
services to existing reports (California Health Data and
Planning Fund).
COMMENTS:
1)Purpose. According to the author, outpatient services are not
subject to many of the laws and regulations designed to ensure
patient safety and adequate staffing standards in acute care
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hospitals. In addition, individuals are often unaware they
are being placed on observation status and believe they are
admitted as hospital inpatients, with implications for patient
cost-sharing and availability of services. This bill seeks to
establish standards related to observation services.
2)Background. Hospitals can provide services on either an
inpatient or an outpatient basis. A physician order is
necessary to admit a patient to the hospital as an inpatient.
According to the Department of Health and Human Services,
observation services are short-term treatments and assessments
provided to outpatients to determine whether beneficiaries
require further treatment as inpatients, or can be discharged.
In 2013, Medicare adopted a payment rule termed the
"two-midnight rule," in order to clearly define what services
qualified for inpatient payment rates, which are generally
higher. The rule was intended to clarify that inpatient
services are appropriate when the stay is expected to last two
midnights. This rule puts hospitals at risk of claims denial
from Medicare for inpatient services that do not last span at
least two midnights. The rule has led to physician, hospital,
and patient concern; has been delayed and revised; and has
impacted hospital policies and practices.
In particular, the two-midnight rule has led to greater use of
observation status instead of admitting patients who may be
expected to have a short hospital stay. However, according
to the journal Health Affairs, patients may or may not
understand they are being held in observation status instead
of admitted as inpatients. This is a concern because status
as an inpatient or outpatient affects payment, patient
cost-sharing, and eligibility for skilled nursing facility
(SNF) services. For instance, one of the requirements
necessary for Medicare to cover a stay in a skilled SNF is
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that the beneficiary must have had an inpatient hospital stay
of at least three days prior to admission to the SNF.
Patients held in observation do not qualify for SNF services
through Medicare regardless of length of stay because they are
technically not inpatients, even though they may have stayed
in a hospital bed for three days. A federal law requiring
Medicare patients to be notified when they are being held for
observation instead of admitted as inpatients goes into effect
this year.
As the author also notes, observation status also does not
require the same nurse-to-patient ratio standards as inpatient
care.
3)Support. The California Nurses Association (CNA) is the
sponsor of this bill and states that because observation units
are considered an outpatient service, they are not subject to
many of the laws and regulations designed to ensure patient
safety and adequate staffing standards. California Labor
Federation and the California School Employees Association
also support.
4)Opposition. Tenet Healthcare and Marin Healthcare District
oppose this bill. Tenet cites conflict with federal law, and
Marin contends the staffing ratio is unnecessarily high.
5)Prior Legislation.
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a) SJR 8 (Hernandez), Resolution Chapter 135, Statutes
of 2015, urged the federal government to reform
short-stay hospital admissions criteria and to
discontinue the two-midnight rule.
b) SB 1238 (Hernandez) of 2014, SB 1269 (Beall) of
2014, and SB 483 (Beall) of 2015 were all attempts at
more stringent regulation of observation services, and
all were held on the Senate Appropriations suspense file.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081