BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1269
AUTHOR: Beall
INTRODUCED: February 21, 2014
HEARING DATE: April 30, 2014
CONSULTANT: Marchand
SUBJECT : General acute care hospitals.
SUMMARY : Requires a general acute care hospital that provides
observation services, as defined, to apply for approval from the
California Department of Public Health 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.
Existing law:
1.Licenses general acute care hospitals under the California
Department of Public Health (CDPH). 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.
2.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.
3.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.
4.Requires CDPH to adopt regulations that establish
Continued---
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nurse-to-patient ratios by hospital unit for all general acute
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,
post-anesthesia 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.
5.Establishes the Office of Statewide Health Planning and
Development (OSHPD), and designates OSHPD as the single state
agency to collect specified health facility or clinic data for
use by all state agencies. Requires hospitals to make
specified reports to OSHPD, including quarterly summary
financial and utilization data that includes the number of
discharges, the number of inpatient days, the number of
outpatient visits, total operating expenses, and inpatient and
outpatient gross revenues by payer.
This bill:
1.Defines "observation services" as outpatient services provided
by a general acute care hospital to patients, as specified,
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 a general acute care hospital that provides
observation services to either apply for approval from CDPH to
provide the services as a supplemental service, as specified,
or apply for a special permit from CDPH to provide the
services as a special service, as specified. Adds observation
services to the list of special services for which general
acute care hospitals may apply, and be approved by CDPH, to
provide in addition the basic services required of all
hospitals.
3.Requires CDPH to adopt standards and regulations for the
provision of observation services under a special permit and
as a supplemental service under the general acute care
hospital's license.
4.Permits observation services to include the use of a bed,
monitoring by nursing and other staff, and any other services
that are reasonable and necessary to safely evaluate a
patient's condition or determine the need for a possible
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inpatient admission to the hospital.
5.Limits observation services to a period of no more than 24
hours.
6.Limits appropriately licensed practitioners to ordering
observation services for only the following:
a. A patient who has received triage services in
the emergency department but has not been admitted as
an inpatient;
b. A patient who has received outpatient surgical
services and procedures;
c. A patient who has been admitted as an
inpatient and is discharged to an observation center;
or,
d. A patient previously seen in a physician's
office or outpatient clinic.
7.Requires observation services provided by a general acute care
hospital, including services provided in a freestanding
physical plant, to comply with the same staffing standards,
including licensed nurse-to-patient ratios, as supplemental
emergency services, notwithstanding provisions of law ensuring
outpatient services provided in a freestanding building of a
hospital are not held to higher standards than clinics.
8.Requires a patient receiving observation services be provided
with a written notice that his or her care is being provided
in an outpatient setting, and that this may impact
reimbursement by Medicare, Medi-Cal, or private payers of
health care services, or cost-sharing arrangements through his
or her health care coverage.
9.Requires all areas in which observation services are provided
to be marked by signage identifying the area as an outpatient
area. Requires this signage to use the term "outpatient" in
the title of the area to clearly indicate to all patients and
family members that the observation services provided in the
center are not inpatient services.
10.Requires observation services to be deemed outpatient or
ambulatory services that are revenue-producing cost centers
associated with hospital-based or satellite service locations
that emphasize outpatient care. Specifies that identifying an
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observation service by a different name or term does not
exempt the hospital from the requirement of providing
observation services as a distinct supplemental service or a
distinct special permit service, as applicable.
11.Adds the number of observation service visits and number of
hours of observation services provided, as well as total
observation service gross revenues by payer, to the list of
summary financial and utilization data that hospitals are
required to report quarterly to OSHPD.
12.Excludes observation service visits from the number of
outpatient visits that hospitals are already required to
report to OSHPD, to ensure outpatient visits are counted
separately.
13.Requires CDPH to adopt and enforce staffing standards for
supplemental outpatient surgical services provided in a
general acute care hospital, or in a freestanding physical
plant of a general acute care hospital, or in an ambulatory
surgery center of a general acute care hospital, that are
consistent with the staffing standards for inpatient surgical
services and post-anesthesia care provided in hospitals and
that will apply when the freestanding physical plant provides
outpatient services and administers anesthesia, except local
anesthesia or peripheral nerve blocks, in doses that have the
probability of placing a patient at risk for loss of the
patient's life-preserving protective reflexes.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, more and more,
hospitals are placing patients who cannot be safely discharged
to their homes in "observation units" as an alternative to
hospital admission. In these settings, patients are sometimes
placed for prolonged periods of time. Outpatient services are
not subject to many of the laws and regulations designed to
ensure patient safety and adequate staffing standards.
Additionally, hospitals are not required to report data to the
state on observation service utilization, which leaves the
public with a dearth of information on how often and for what
reasons outpatient observation services are used. The
increasing use of these settings for patients in need of
inpatient care raises serious concerns about patient access to
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safe levels of care and services. Changes in hospital trends
should not impact patient care and safety.
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, 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.
3.Nurse to patient ratios. In 2004, regulations implementing
nurse-to-patient ratios in California hospitals pursuant to AB
394 (Kuehl), Chapter 945, Statutes of 1999, went into effect.
The regulations implementing the AB 394 nurse-to-patient
ratios law set the minimum ratio of licensed nurses to patient
by unit, including one-to-two in intensive care units, and
one-to-five in general medical-surgical units. Licensed
nurses, generally speaking, can include both registered nurses
and licensed vocational nurses, except where specified, but
limits licensed vocational nurses to only 50 percent of the
required licensed nurses for each unit. For hospitals
providing basic emergency services or comprehensive emergency
services, the regulations require the nurse-to-patient ratio
in the emergency department to be one-to-four or fewer at all
times that patients are receiving treatment, and requires no
fewer than two licensed nurses to be physically present in the
emergency department when a patient is present. The ratio for
a "surgical service operating room" is one registered nurse
assigned to the duties of the circulating nurse and a minimum
of one additional person serving as a scrub assistant for each
patient-occupied operating room, which may be a licensed nurse
or an operating room technician, but cannot be a licensed
health professional who is assisting in the performance of the
surgery.
4.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,
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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 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 this September. 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 stay 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
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
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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.
5.Related legislation. SB 1238 (Hernandez) would require 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. SB 1238 is also scheduled to be
heard in Senate Health Committee on April 30, 2014.
SB 631 (Beall) of 2013 contained provisions similar to this bill
and was referred to Senate Health Committee, but was never set
for a hearing.
6.Support. This bill is sponsored by the California Nurses
Association (CNA), which states that this bill will require
observation services to be licensed by CDPH and require
outpatient surgical settings to be staffed at the same level
of inpatient surgical settings. CNA states that more and more,
hospitals are placing patients who cannot be safely discharged
to their homes in "observation units" as an alternative to
hospital admission. In these settings, patients are sometimes
placed for prolonged periods of time, and many patients are
not aware that they are in observation, leaving them to
believe they are admitted as inpatients. CNA states that this
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. CNA states that
outpatient services are not subject to many of the laws and
regulations designed to ensure patient safety and adequate
staffing standards. Additionally, hospitals are not required
to report data to the state on observation service
utilization, which leaves the public with a dearth of
information on how often and for what reasons outpatient
observation services are used. CNA states that this bill will
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address these concerns by requiring hospitals to obtain
approval from the state to provide an observation service,
limit the period of time a patient may be placed in
observation to 24 hours to make it consistent with time
limitations imposed on other outpatient settings, require
observation services to meet the same staffing standards as
emergency rooms, and require hospitals to provide notice to
patients that observation services are "outpatient" services
and third-party reimbursement may be affected. Finally, CNA
states that along with the general shift of inpatient care to
outpatient settings, there is concern over the increased use
of outpatient surgical settings for inpatient-level surgeries,
and that this bill would take a reasonable approach to ensure
safe staffing standards in hospital outpatient surgical
settings when general anesthesia is used.
7.Opposition. This bill is opposed by the California Hospital
Association (CHA), which states that this bill would reduce
the quality of patient care, place patient safety at risk,
cause California hospitals to forego important Medicare
reimbursement, impose burdensome reporting requirements, and
increase the costs of care. CHA states that because CMS has
classified certain Medicare patients as "observation"
patients, this bill would require every hospital in California
to apply for this new special permit. CHA states that because
"observation" is an outpatient status, this new requirement
would require hospitals to convert inpatient beds to
outpatient observation beds, reducing the number of inpatient
beds and resulting in inpatient bed shortages in some parts of
the state. CHA states that requiring all observation patients
to be placed only in observation beds would be in direct
conflict with the best practice of medicine in which the
physician determines, based on patient needs, the appropriate
type of bed in which to place a patient. CHA states that
prohibiting an observation patient from being on observation
for more than 24 hours also conflicts with high quality care,
since a physician often uses observation before determining if
inpatient care is medically necessary. Setting a strict time
limit on how long a patient may remain in observation is not
consistent with the time needed to make these determinations.
In addition, CHA states that this 24 hour maximum conflicts
with the 2-midnight rule established by CMS. If applied, CHA
states that the 24 hour limit may cause California hospitals
to lose millions of dollars in payments from CMS due to
payments for inpatient admissions being denied. Finally, CHA
states that if the intent of this bill is to require
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freestanding surgery centers to comply with staffing ratios,
the bill does not adequately address this point. CHA states
that freestanding surgery centers are accredited by
independent accreditation organizations, and that the Medical
Board of California is responsible for monitoring compliance
with accreditation standards. Numerous individual hospitals
and health systems have also written in opposition, making
similar arguments as CHA.
The California Chapter of the American College of Emergency
Physicians (CalACEP) states in opposition that because of the
unique crisis in psychiatric inpatient capacity, this bill
would reduce payment to hospitals and emergency physicians.
CalACEP states that unlike patients with cardiac, neurosurgery
or other critical healthcare needs who can be transferred
within hours to receive further specialty treatment,
psychiatric patients commonly await transfer in emergency
departments for days due to the acute shortage of inpatient
psychiatric beds statewide. Currently, emergency physicians
are able to bill under observation status for the care
provided during these days, but if this bill were to become
law, emergency physicians would only be reimbursed for the
first 24 hours of care they provide to these mental health
patients.
8.Policy comments.
a. Observation services vs. observation unit. Hospital
representatives assert that many patients who are being
treated under "observation care" are assigned to the unit
of the hospital that is most appropriate to the patient's
condition and acuity. Hospitals assert, for example, that
some patients might be assigned to the Intensive Care
Unit, even while in observation status, if there is
concern that the patient might be having a stroke. Other
patients might be in pre-labor, and so are assigned
observation in the Labor and Delivery Unit.
The sponsor of this bill has indicated that they did not
intend to limit the ability of hospitals to assign
observation patients to the appropriate unit of the
hospital, but rather to require those hospitals
establishing a special area for observation services to
obtain approval for a supplemental or special service for
that area. If this is the author's intent, this bill
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should be amended to distinguish between "observation
services" and an "observation unit" that would be a
supplemental or special service. Further, these
amendments should clearly distinguish which of the bill's
provisions - such as signage, notice to patients, the
24-hour time limitation, OSHPD data reporting, etc. -
apply to both observation services and observation units,
or to just one or the other.
b. Applying different standards to outpatient
ambulatory surgery centers. The author indicates that the
outpatient and ambulatory surgery staffing provisions of
this bill build on the staffing model used in AB 491
(Ma), Chapter 772, Statutes of 2012, which permitted
qualified hospitals to provide cardiac catheterizations
in an outpatient setting, under specified conditions.
One of the requirements of AB 491 is that the cardiac
catheterization service in the outpatient setting is
required to comply with the same staffing ratios as
inpatient catheterization service.
However, applying this model to an outpatient surgical
service is different. In the case of cardiac
catheterization, prior to AB 491, all cardiac
catheterization laboratories were required to be located
in a general acute care hospital. Outpatient surgery, on
the other hand, is widely available in settings that are
not tied to a hospital license. There are some surgical
clinics that are licensed by CDPH which are not
associated with a general acute care hospital. Far more
common, however, are physician-owned surgery centers that
are accredited by an accreditation agency approved by the
Medical Board of California. These accredited surgical
clinics can perform the same types of surgery as an
outpatient surgical service of a hospital - anything that
requires a stay of less than 24 hours. The committee may
wish to consider whether it is appropriate public policy
to apply a staffing standard to one setting - the
outpatient surgical service of a general acute care
hospital - and not to physician-owned settings that are
permitted to perform the same procedures using the same
level of anesthesia.
SUPPORT AND OPPOSITION :
Support: California Nurses Association (sponsor)
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Oppose: Adventist Health - Central Valley Network
Alhambra Hospital Medical Center
Arroyo Grande Community Hospital
Bakersfield Memorial Hospital
Banner Lassen Medical Center
Barton Health
California Chapter of the American College of
Emergency Physicians
California Hospital Association
Children's Hospital Central California
Citrus Valley Health Partners
Colusa Regional Medical Center
Community Medical Centers
Community Memorial Health System
Cottage Health System
Delano Regional Medical Center
Dignity Health
Dignity Health - California Hospital Medical Center
Dignity Health Dominican Hospital
Frank R. Howard Memorial Hospital
Glendale Memorial Hospital and Health Center
Henry Mayo Newhall Memorial Hospital
Hi-Desert Medical Center
John Muir Health
Kaiser Permanente
Mark Twain Medical Center
Mercy Hospital of Folsom
Mercy General Hospital
Mercy Hospital of Bakersfield
Mercy Medical Center
Mercy Medical Center Mt.Shasta
Mercy Medical Center Redding
Mercy San Juan Medical Center
Methodist Hospital of Sacramento
Methodist Hospital of Southern California
Northern California Network of Adventist Health
Northridge Hospital Medical Center
Oroville Hospital
Providence Health and Services
Providence Holy Cross Medical Center
Redlands Community Hospital
San Gabriel Valley Medical Center
Sequoia Hospital
Sierra Nevada Memorial Hospital
Simi Valley Hospital
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St. Elizabeth Community Hospital
St. John's Hospital
St. Joseph's Behavioral Health Center
St. Joseph's Medical Center
St. Mary's Medical Center
Sutter Health
Alhambra Hospital Medical Center
Banner Lassen Medical Center
Barton Health
Cedars-Sinai Medical Center
Centinela Hospital Medical Center
Central Valley Network/Adventist Health
Children's Hospital Central California
Citrus Valley Health Partners
Colusa Regional Medical Center
Community Medical Centers
Community Memorial Health System
Cottage Health System
Delano Regional Medical Center
Dignity Health
Frank R. Howard Memorial Hospital
Good Samaritan Hospital, San Jose
Henry Mayo Newhall Memorial Hospital
Hi-Desert Medical Center
John Muir Health
Long Beach Memorial / Community Hospital Long Beach
Methodist Hospital of Southern California
MemorialCare Health System
Natividad Medical Center
NorthBay Healthcare
Northern California Network of Adventist Health
O'Connor Hospital / Saint Louise Regional Hospital
Olympia Medical Center
Orange Coast Memorial
Oroville Hospital
Palomar Health
Pomona Valley Hospital
Providence Health & Services Southern California
Providence Holy Cross Medical Center
Redlands Community Hospital
Saddleback Memorial Medical Center
Saint Francis Memorial Hospital
St. Helena Hospital Region/Adventist Health
San Gabriel Valley Medical Center
Sharp Healthcare
Simi Valley Hospital/Adventist Health
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Sierra View District Hospital
Sonora Regional Medical Center
Stanford Hospital & Clinics
Sutter Health
White Memorial Medical Center
Woodland Healthcare
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