BILL ANALYSIS Ó SB 1076 Page 1 SENATE THIRD READING SB 1076 (Hernandez) As Amended August 18, 2016 Majority vote SENATE VOTE: 32-5 -------------------------------------------------------------------- |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+-----------------------+---------------------| |Health |16-2 |Wood, Maienschein, |Lackey, Patterson | | | |Bonilla, Burke, | | | | |Campos, Chiu, Gomez, | | | | |Roger Hernández, | | | | |Nazarian, Olsen, | | | | |Ridley-Thomas, | | | | |Rodriguez, Santiago, | | | | |Steinorth, McCarty, | | | | |Waldron | | | | | | | |----------------+-----+-----------------------+---------------------| |Appropriations |16-4 |Gonzalez, Bloom, |Bigelow, Jones, | | | |Bonilla, Bonta, |Obernolte, Wagner | | | |Calderon, Chang, Daly, | | | | |Eggman, Gallagher, | | | | | | | | | | | | SB 1076 Page 2 | | |Eduardo Garcia, | | | | |Holden, Quirk, | | | | |Santiago, Weber, Wood, | | | | |Chau | | | | | | | | | | | | -------------------------------------------------------------------- SUMMARY: Requires a hospital patient receiving observation services, either in an inpatient or observation unit of a hospital, as defined, to be notified that they are on observations status. Specifically, this bill: 1)Defines observation services as 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. 2)Requires, when a patient in an inpatient unit of a hospital or in an observation unit, as defined, is receiving observation services, or following a change in a patient's status from inpatient to observation, that the patient receive written notice that he or she is on observation status. Requires the patient to receive the notice in writing, as soon as practicable. Requires the notice to state 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. 3)Defines "observation unit" 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. Allows a hospital to establish SB 1076 Page 3 one or more observation units that must be marked with signage identifying the observation unit area as an outpatient area. Requires the signage to use the term "outpatient" in the title of the designated area to clearly indicate to all patients and family members that the observation services provided in the center are not inpatient services, and that identifying an observation unit by a name or term other than that used in these provisions does not exempt the hospital from compliance with these requirements. 4)Requires an observation unit to comply with the same licensed nurse-to-patient ratios as supplemental emergency services, as specified. 5)Requires, upon request, the Office of Statewide Health Planning and Development (OSHPD), to include summaries of observation services data, as part of existing summaries of individual facility and aggregate data currently posted on OSHPD's Internet Web site FISCAL EFFECT: 1)Ongoing costs, less than $50,000 per year, for additional licensing enforcement activity by the Department of Public Health (DPH) and Los Angeles County (Licensing and Certification Fund). Under this bill, DPH (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). SB 1076 Page 4 COMMENTS: 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. The author states that, 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. Two midnight rule. On August 2, 2013, the Centers for Medicare and Medicaid Services (CMS) issued a final rule updating its Medicare payment policies. This rule, commonly known as the two-midnight rule, 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 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 CMS two-midnight rule. In response to numerous complaints, in early 2014, CMS announced that it would delay enforcement of the rule through September 2014, and this delay was subsequently extended several times. Most recently, as part of the Medicare Access and Children's Health Insurance Program Reauthorization Act of 2015 that President Obama signed into law on April 16, 2015, the delay on enforcement was extended through September 30, 2015. Federal Notice of Observation, Treatment, and Implication for Care Eligibility (NOTICE) Act. Federal legislation passed last SB 1076 Page 5 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. The NOTICE Act is scheduled to take effect in August of this year, and CMS is currently preparing rulemaking to implement this law. Several states already require observation care notices including: Connecticut, Maryland, New York, Pennsylvania, and Virginia. 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. CNA continues, many patients are not aware that they are in observation, leaving them to believe they are admitted as inpatients, which is especially concerning for patients who may need to be discharged to a long-term care facility, as Medicare requires patients to be admitted as inpatients for three days before coverage for long-term care will kick in. The California School Employees Association (CSEA) supports this bill noting that for patient safety this bill requires the staffing in observation units to be the same as staffing emergency rooms, and CSEA believes that staffing requirements in observation units are important. The California Labor Federation (CLF) supports this bill stating the impact on patients of the misuse of observation units can be devastating. CLF notes that since observation services are considered outpatient care, patients can be billed for every individual service, test, and drug provided, rather than just paying a SB 1076 Page 6 single co-pay for inpatient care that includes all services. The Marin Healthcare District (MHD) writes in opposition that they believe the 1:4 nurse/patient ratio required by this bill is much too high for these low acuity patients, noting that the patients they place on observation status are not sick enough to be admitted to the hospital. MHD concludes that staffing levels should be left to the hospital to determine for these low acuity patients. Analysis Prepared by: Lara Flynn / HEALTH / (916) 319-2097 FN: 0003960