BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1238 (Hernandez) - Health care: health facilities: outpatient
care and patient assessment.
Amended: May 7, 2014 Policy Vote: Health 7-0
Urgency: No Mandate: Yes
Hearing Date: May 19, 2014 Consultant: Brendan McCarthy
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1238 would limit the ability of hospitals to
use "observation services" by requiring a hospital patient to
either be discharged or admitted as an inpatient after no more
than 24 hours, with limited exceptions.
Fiscal Impact:
Costs of about $130,000 per year for three to four years to
develop and adopt regulations by the Department of Public
Health (Licensing and Certification Program Fund).
Minor costs to enforce the bill's requirements on hospitals
by the Department (Licensing and Certification Program
Fund).
Unknown increase in Medi-Cal spending for hospital services
(General Fund and federal funds). Under current practice,
the Medi-Cal program does not recognize observation services
as a distinct category. Thus, when hospitals place a patient
on observation status, it is not clear how they bill
Medi-Cal for services. Provided they receive a treatment
authorization from Medi-Cal, hospitals could bill the
program for an inpatient hospitalization when a patient is
on observation status. Alternatively, hospitals may only be
billing Medi-Cal for outpatient services, which are less
costly. Under the bill, hospitals are likely to admit more
patients to inpatient care. In the cases of hospitals that
have been billing Medi-Cal only for outpatient services,
this is likely to increase Medi-Cal costs by shifting those
services to more costly inpatient services. The extent of
this impact is unknown.
Background: Under current law, general acute care hospitals are
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licensed by the Department of Public Health. Licensed general
acute care hospitals are authorized to provide 24-hour inpatient
care with a variety of basic medical services. In addition,
hospitals can apply to offer special services such as an
emergency center, psychiatric services, cardiac surgery, and
others. Hospitals can also apply to provide outpatient services.
Historically, when a patient was treated at an emergency
department or underwent a surgical procedure, a physician would
make a determination whether the patient could go home or needed
to be admitted to the hospital as an inpatient for further
observation and/or treatment. Existing regulations define an
"outpatient" as someone who has not been formally admitted to a
hospital and who does not remain over 24 hours.
In recent years, hospitals have begun treating patients under
"observation status" or "observation services" in which the
patient is not actually admitted to the hospital as an
inpatient, but is nevertheless given a bed in the hospital and
kept under clinical observation. In part, this trend is being
driven by Medicare and other third-party payers who are refusing
to pay for inpatient admissions under certain circumstances.
This leads to hospitals keeping patients on observational
status, often for more than 24 hours. Under federal Medicare
rules, a beneficiary is only eligible for Medicare-funded
skilled nursing facility care after three days as an inpatient
in a hospital. If a patient was in a hospital for several days,
but some of those days were on observation status, the patient
may unknowingly be ineligible for Medicare payment for the
subsequent skilled nursing care.
Proposed Law: SB 1238 would limit the ability of hospitals to
use "observation services" by requiring a hospital patient to
either be discharged or admitted as an inpatient after no more
than 24 hours, with limited exceptions.
Specific provisions of the bill would:
Require a patient to be assessed by a licensed health care
worker after stabilization in an emergency department or
postsurgical outpatient services;
Require, after no more than 24 hours, an outpatient to be
either discharged or admitted as an inpatient;
Authorize an outpatient stay of more than 24 hours under
specified conditions and as specified by the Department of
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Public Health through regulation;
Require documentation in a patient's record when the
patient remains as an outpatient for more than 24 hours.
Related Legislation:
SB 1269 (Beall) would require hospitals that provide
observational services to apply for approval from the
Department of Public Health to provide such services as a
supplemental service. The bill would place requirements and
restrictions on the use of observational care. That bill
will be heard in this committee.
SB 631 (Beall, 2013) was substantially similar to SB 1269.
That bill was held in the Senate Health Committee.
Staff Comments: The only costs that may be incurred by a local
agency under this bill relate to crimes and infractions. Under
the California Constitution, such costs are not reimbursable by
the state.