Important legislation to enact new protections for hospital patients warehoused in “observation status” took a major step forward Monday with approval in the California Assembly on a bipartisan 59-10 vote.

The bill goes back to the Senate for a final concurrence vote on the Senate floor, probably this week, and if approved would go to the governor’s desk.

SB 1076, introduced by Sen. Ed Hernandez of West Covina and sponsored by the California Nurses Association/National Nurses United, would extend to patients placed, often without their knowledge, in “observation” beds in hospitals the same protections provided to other hospital patients.

“Too many hospitals exploit “observation” status, holding a patient in a hospital bed or even on a gurney in a hallway to avoid admitting patients in need of more specialized hospital care. It’s time to end that abuse,” said CNA Co-President Malinda Markowitz.

“Our thanks to all the Assembly members who supported this very important legislation,” Markowitz added.

In a statement earlier this year, Sen. Hernandez noted that "SB 1076 makes certain hospitals provide quality care while ensuring staffing levels that keep patients safe, irrespective of how a patient is classified." 

Patients placed in an observation bed or gurney can face substantial health and financial risk, nurses say. While under “observation” status, the patient is considered to be under outpatient regulations, with the hospital then able to avoid the same public regulatory protections, including safer staffing rules required for patients formally admitted to the hospital.

The economic consequences for patients can be extensive. Patients held under “observation” for the entire duration of their hospital stay who are then discharged to a nursing home or other long term care facility do not qualify for the same Medicare reimbursement, and can face mammoth out-of-pocket costs.

Medicare requires patients to be admitted as inpatients for three days before coverage for long-term care will kick in.  However, time spent in observation does not count, as observation services are outpatient services.

Making the problem worse, patients held in “observation” in a hospital are frequently not told of their hospital status.

 SB 1076:

• Clarifies that observation units must meet the same staffing standards as emergency rooms.
• Requires hospitals to provide notice to patients that observation services are “outpatient” services and third-party reimbursement may be impacted – and to mark units dedicated for “observation” status as an outpatient area when that unit is not in an ER or part of a normal inpatient unit.
• Directs hospitals to report observation services to the Office of Statewide Health Planning and Development.
• Prohibits hospitals from evading the requirements by disguising “observation” units with a different name.