One of the biggest growing and least reported problems in U.S. hospitals – the placement of patients in “observation” status, where they can be held for hours or days with less public oversight and fewer protections – is the theme of a new bill just re-introduced in the California legislature.

Senate Bill 483, authored by Sen. Jim Beall and sponsored by the California Nurses Association/National Nurses United, seeks to extend protections for “observation” patients that are provided to other patients in the hospital setting.

“Use of ‘observation’ status is an escalating abuse that puts patients at health and financial risk. It’s time to provide all patients the same level of protection when they need hospital care,” said CNA Co-President Zenei Cortez, RN.

CNA contends that hospitals increasingly use “observation” status – which can mean holding a patient in a hospital bed or even on a gurney in a hallway for long periods of time – specifically to avoid admitting patients in need of more specialized hospital care.

In part, the goal is to avoid federal penalties for patients who are frequently re-admitted to hospital care after discharge; the same penalties do not apply for a patient re-admitted after discharge from an observation unit.

Observation status is treated as outpatient, not inpatient care, meaning that a patient, even in a hospital bed, does not qualify for the same regulatory requirements and oversight.

Moreover, 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.

“Many of these patients are extremely sick. Many have serious symptoms such as chest pain and cardiac complaints, and when discharged will likely return with the same symptoms or medical problem. Yet the hospital will not be fined by Medicare because the patient was never formally admitted,” says Cortez.

SB 483:

• Limits the period of time a patient may be placed in observation to 24 hours making it consistent with time limitations imposed on other outpatient settings.

• Requires observation services to meet the same staffing standards, including licensed nurse-to-patient ratios, as emergency rooms.

• Requires hospitals to provide notice to patients that observation services are “outpatient” services and third-party reimbursement may be impacted.

• Requires hospitals to report observation services to the Office of Statewide Health Planning and Development.