BILL ANALYSIS                                                                                                                                                                                                    Ó



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          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,     |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |








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          |                |     |Eduardo Garcia,        |                     |
          |                |     |Holden, Quirk,         |                     |
          |                |     |Santiago, Weber, Wood, |                     |
          |                |     |Chau                   |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |
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          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  








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            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).









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          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  








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          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  








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          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