BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1238
AUTHOR: Hernandez
AMENDED: April 10, 2014
HEARING DATE: April 30, 2014
CONSULTANT: Marchand
SUBJECT : Health care: health facilities: outpatient care and
patient assessment.
SUMMARY : Requires an outpatient to either be discharged or
admitted to inpatient status after no more than 24 hours, but
permits an outpatient stay of longer than 24 hours when
discharge is imminent under certain specified circumstances,
including when admission to inpatient status would directly
conflict with federal Medicare reimbursement requirements.
Existing law:
1.Establishes the California Department of Public Health (CDPH),
which licenses and regulates health facilities, including
general acute care hospitals.
2.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.
3.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.
4.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.
5.Requires CDPH to adopt regulations that establish
nurse-to-patient ratios by hospital unit for all general acute
Continued---
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care hospitals, all acute psychiatric hospitals, and all
special hospitals, as defined. Defines "hospital unit" as a
critical care unit, burn unit, labor and delivery room,
postanesthesia 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.
This bill:
1.Requires a patient, following stabilization in an emergency
department or postsurgical outpatient services, to be assessed
by a licensed health care professional acting within his or
her scope of practice for follow-up care, including, but not
limited to, discharge, transfer to another health facility or
community setting, or admission as an inpatient.
2.Requires an outpatient, after no more than 24 hours, but as
soon as reasonable and medically appropriate, to be discharged
or admitted to inpatient status. Requires a patient to be
assessed and frequently reassessed for a change in condition
until admission, transfer, or discharge occurs.
3.Permits an outpatient say of longer than 24 hours when
discharge is imminent, under the following conditions:
a. To arrange for a safe discharge;
b. To make arrangements to provide public social
services to a patient;
c. If admission to inpatient status would
directly conflict with federal Medicare reimbursement
requirements for that patient; or,
d. In other specified circumstances, as
determined medically appropriate by CDPH.
4.Requires, when a patient remains in a hospital for longer than
24 hours pursuant to one of the specified provisions in 3)
above, that this be documented in the patient's medical
record, along with the condition that necessitated an
outpatient stay of longer than 24 hours.
5.Requires care extended to a patient for a period longer than
24 hours without an admission to inpatient status to be
actively monitored with frequent reassessment for a change in
condition, and placement to be made as soon as medically
appropriate.
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FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, this bill was
introduced to address the growing trend of patients being
treated under "observation status," as an outpatient, for
extended periods of time. According to the author, California
law has long drawn a distinction between outpatient medical
care, which is anything 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.
California regulations make this explicit by prohibiting
hospitals from keeping a patient longer than 24 hours without
admitting that patient. However, we are learning, through
media reports and in conversation with hospitals, that
third-party payers are increasingly unwilling to authorize
inpatient admissions for patients, and asking instead that
these patients be kept in the hospital under "observation," as
an outpatient. While the Medicare "2-midnight rule" is clearly
a major driver of this trend, other payers are beginning to
follow suit, placing more and more patients in jeopardy of
higher out-of-pocket costs, and without the regulatory
protection of being an inpatient. This bill will address these
concerns by requiring patients to be admitted within 24 hours,
while providing appropriate flexibility when a slightly longer
stay is necessary to provide for a safe discharge, or when
admission will directly conflict with Medicare payment
guidelines.
2.Existing regulations require patients who stay longer than 24
hours to be admitted. Existing California regulations that
govern health facilities include a definition of a patient. As
part of this definition, an "inpatient" is defined as "a
person who has been formally admitted for observation,
diagnosis or treatment and who is expected to remain overnight
or longer." An "outpatient" is defined as "a person who has
been registered or accepted for care but not formally admitted
as an inpatient and who does not remain over 24 hours.
According to CDPH, based on this regulation, unless it has
granted a hospital flexibility from this regulation, it would
not be legal for a hospital to keep a patient more than 24
hours without formally admitting that patient as an inpatient.
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3.Medicare "2-Midnight Rule." On August 2, 2013, the Centers
for Medicare and Medicaid Services (CMS) issued a final rule
updating its Medicare payment policies. This final rule,
commonly known as the "2-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. The rule
is enforced by contractor audits that review records of
patients, and revoke payment for inpatient stays that did not
meet the CMS 2-midnight rule.
This has been very controversial within the hospital community,
and earlier this year, CMS announced that it would delay
enforcement of the rule through September 2014. Earlier this
month, the American Hospital Association (AHA), along with a
number of other named plaintiffs, filed a lawsuit against this
2-midnight rule, arguing in part that CMS has long recognized
that the decision to admit a patient to the hospital is a
complex judgment call that involves consideration of various
factors. AHA asserts that in the past, CMS has instructed
hospitals and physicians that "generally, a patient is
considered an inpatient if formally admitted as an inpatient
with the expectation that he or she will remain at least
overnight and occupy a bed, even if it later develops that the
patient can be discharged or transferred to another hospital
and not actually use a bed overnight." AHA states that this
2-midnight rule has deprived hospitals of Medicare
reimbursement for reasonable, medically necessary care they
provide to patients, and that the rule is arbitrary. AHA
asserts that most importantly, this rule defies common sense:
the word "inpatient' simply doesn't mean "a person who stays
in the hospital until Day 3," and CMS is not at liberty to
change the meaning of words to save money.
This 2-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 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
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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.
4.Related legislation. SB 1269 (Beall) would require a general
acute care hospital that provides observation services, as
defined, to apply for approval from CDPH to provide the
services as a supplemental or special service, as specified,
limits observation service to less than 24 hours, requires
this observation service to have the same staffing, including
nurse-to-patient ratios, as emergency services, and includes
data on observation service in the reports that hospitals are
required to make to the Office of Statewide Health Planning
and Development. SB 1269 is also scheduled to be heard in the
Senate Health Committee on April 30, 2014.
SB 631 (Beall) of 2013 contained provisions similar to SB
1269, and was referred to Senate Health Committee, but was
never set for a hearing.
5.Support. This bill is sponsored by Tenet Healthcare, which
states that this bill addresses the important issue of
over-utilization of observation stays, a concern that has been
widely documented in the media. Tenet states that it is
disturbed by the increasing number and length of observation
stays its hospitals have experienced, and that there is no
discernible medical explanation. According to Tenet, an
observation patient is not an inpatient, but occupies a
hospital bed for potentially multiple days, and that the
patient, and sometimes the hospital, is unaware that an
admission has not been approved. According to Tenet, its
emergency rooms frequently operate at capacity, and it strives
to triage patients expeditiously and move them out of the
emergency department. If a patient needs treatment under
medical supervision, he or she is moved to an inpatient bed.
While the best patient care is delivered, the actual admission
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status of the patient becomes an issue determined between the
medical groups, health plans and billing office. Tenet states
that the Medicare fee-for-service "2-midnight rule" guidelines
are focused on limiting government expenditures and are not a
medical framework for care. Moreover, Tenet states that the
California Code of Regulations currently limits the length of
an outpatient stay to less than 24 hours. Tenet states that
this bill reinforces the timely assessment and admission
determination of the attending physician inherent in existing
California regulation, while adding flexibility to assure a
safe discharge and allow for compliance with the evolving
Medicare fee-for-service payment guidance.
6.Letter of concern. The California Hospital Association (CHA)
states that it has the following concerns: 1) this bill does
not specify whether the 24-hour time frame begins with the
patient's initial presentation, when the patient is placed in
an emergency room bed, placed in an observation bed, or
stabilized; 2) there is no way for a hospital to
operationalize the 24-hour requirement from a billing
perspective, since the standard claim form doesn't contain a
field for the presentation hour, and the only way for a payer
to verify if the claim was accurately billed as an inpatient
stay according to the 24-hour requirement would be to review
the medical records; and, 3) CHA is concerned that
California's definition of an inpatient admission will differ
from the federal 2-midnight definition, which leads to the
troubling notion that two patients with the same clinical
criteria will be treated differently due to their insurance
coverage.
7.Opposition. The California Nurses Association (CNA) states in
opposition, that while the bill attempts to address a real
concern regarding the increasing, and inappropriate, use of
observation services, the bill would allow for broad
exceptions for patients to be admitted for longer than 24
hours. CNA states that while this bill aims to be consistent
with current hospital regulations limiting outpatient services
to 24 hours by requiring hospitals to either discharge or
admit to inpatient status after 24 hours, this bill diverges
from current regulations by creating several exceptions to the
24-hour requirement. CNA states that it disagrees that
hospitals should be allowed to have broad exceptions to the
24-hour limit, or exceptions for the purposes of
reimbursement. CNA believes the exception to the 24-hour rule
for federal Medicare reimbursement is patently unfair for
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Medicare patients who should enjoy the same protections as
other inpatients. CNA states it also disagrees with provisions
that create an exception to the 24-hour rule "in other
specified circumstances, as determined medically appropriate
by the department." CNA states that this language is vague,
and could leave open innumerable options under which patients
could remain in observation for any amount of time.
8.Clarifying amendment. On page 3, lines 22-23, this bill
permits an outpatient stay of longer than 24 hours "in other
circumstances, as determined medically appropriate by the
department." The author's intent with this provision was to
require CDPH to use the regulatory process to add any
additional flexibility for the 24-hour rule. To make this
provision clearer, the author is proposing an amendment to
delete this sentence, and instead add new language as follows:
"The department may, by regulation, specify other
circumstances in which hospitals are permitted to provide care
on an outpatient basis for longer than 24-hours."
SUPPORT AND OPPOSITION :
Support: Tenet Healthcare (sponsor)
Oppose: California Nurses Association
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