United States: California Update: New Laws On Adverse Event Reporting And Facility Inspection

Last Updated: November 15 2006
Article by Daniel A. Cody and Paul Pitts

I. Introduction

The California legislature has recently passed, and Governor Arnold Schwarzenegger has signed, two new laws impacting hospitals and other licensed health care facilities. First, the legislature passed new provisions requiring hospitals to report certain adverse events to a state agency charged with publicizing the events, as well as the results of any ensuing investigation. In the same session, the legislature also passed new inspection requirements for hospitals and long-term care facilities. Taken together, the laws expand the circumstances under which a health care provider may be inspected by state officials, and create new monetary penalties for noncompliance with state and federal regulations.

Senate Bill 1301,1 which is effective July 1, 2007, requires California hospitals to report to the Department of Health Services (the "Department") the occurrence of any one of 27 "adverse events." The law also creates a mechanism for others to report such events when a hospital fails to do so. Following receipt of a report, the Department is obligated to investigate the event and publicize its findings. Hospitals failing to report an adverse event in accordance with the new law are subject to a fine not to exceed $100 for each day the event was unreported.

Senate Bill 1312,2 effective July 1, 2007, requires the Department to conduct regular unannounced inspections of all licensed health care facilities to determine compliance with both state and federal law. Importantly, these unannounced inspections also apply to facilities formerly exempt from state inspections based upon their accreditation by an approved organization (e.g., the Joint Commission on Accreditation of Healthcare Organizations) to participate in the Medicare and Medicaid programs. Facilities found to be out of compliance with state or federal regulations may be assessed new administrative penalties. The Department also is authorized to increase both initial and renewal licensing fees for long-term health care facilities in order to cover the cost of increased inspections.

This memorandum will discuss the emergence of state and federal laws requiring health care providers to report medical errors and adverse events to various agencies, analyze in detail the requirements of the new California laws, and identify the responsibilities of the entities subject to the law.

II. Emergence Of Reporting Laws

With the passage of Senate Bill 1301, California follows a number of states adopting strict reporting laws subsequent to the publication of a 1999 landmark report on medical errors by the Institute of Medicine ("IOM"). That report, "To Err Is Human,"3 touched off a new emphasis on patient safety and the prevention of medical error. Since publication of the IOM report, Connecticut, Illinois, Minnesota, and New Jersey all have passed medical error reporting laws. In recent years, a number of other states have adopted voluntary programs or passed other patient safety legislation.4

In July 2005, the federal government created its own system for the voluntary reporting of medical errors to patient safety organizations ("PSOs").5 The Patient Safety and Quality Improvement Act of 2005 (the "Act") provides a mechanism for health care providers to voluntarily report patient safety information, medical errors, and "near misses" to PSOs that are certified by the Secretary of the Department of Health and Human Services. The Act creates legal privilege and confidentiality protections for any patient safety work-product created by a health care provider or developed by a PSO. Voluntarily reporting an adverse event under the Act is completely separate and distinct from any state reporting requirement. The Act does not preempt, or impact in any manner, state laws requiring that providers report medical errors or other adverse events. Health care facilities voluntarily reporting errors to a patient safety organization in accordance with the Act must independently comply with the requirements of any applicable state law.

In a Fact Sheet published in May 2006, the Centers for Medicare & Medicaid Services ("CMS") acknowledged the agency’s interest in expanding efforts to report adverse events such as surgery on the wrong body part or mismatched blood transfusion that should never occur (or "never events" as described by CMS), as well as increasing the financial incentives to reduce the occurrence of such events. Specifically:

CMS is interested in working with our partners and Congress to build on the initial step to more broadly address the persistence of "never events." In particular, CMS is reviewing its administrative authority to reduce payments for "‘never events," and to provide more reliable information to the public about when they occur.6

Given the agency’s interest in aligning reimbursement with outcomes, it appears likely that CMS will propose additional regulations on this issue in the future. While CMS considers additional action to reduce medical errors, states like California are moving forward with a variety of mandatory reporting laws.

III. New California Laws

A. Reporting Adverse Events

Effective July 1, 2007, California hospitals must report any adverse event to the Department within five days of detection of the event. The reporting law was signed by Governor Schwarzenegger on September 29, 2006 and creates a new set of disclosure requirements for all general acute care hospitals, acute psychiatric hospitals, and "special hospitals" (i.e., hospitals providing inpatient or outpatient care in dentistry or maternity). The new law does not alter existing law requiring health care providers to report communicable and other unusual diseases to local health officials. Instead, the new law sets forth an extensive set of reportable events and requires the Department to publish the results of its investigation of those events to the public. Failure to report an adverse event may result in a fine of up to $100 for each day the event is not reported to the Department.

California’s definition of "adverse events" was borrowed from a list of events developed by the National Quality Forum in conjunction with CMS. Adverse events include a wide array of medical, pharmaceutical, and nursing care errors, as well as criminal acts. In summary, these events are classified and described as follows:

1. Surgical

a. Surgery performed on the wrong body part;

b. Surgery performed on the wrong patient;

c. Retention of a foreign object in a patient after surgery or other procedure; and

d. Intraoperative or immediately post-operative death in a normal, healthy patient.

2. Product or device

a. Patient death or serious disability associated with the use of contaminated drugs, devices, or biologics provided by the health care facility;

b. Patient death or serious disability associated with the use or function of a device in patient care in which the device is used or functions other than as intended; and

c. Patient death or serious disability associated with intravascular air embolism that occurs while being cared for in a health care facility.

3. Patient protection

a. Infant discharged to the wrong person;

b. Patient death or serious disability associated with patient disappearance for more than four hours; and

c. Patient suicide or attempted suicide resulting in serious disability while being cared for in a health care facility.

4. Care management

a. Patient death or serious disability associated with a medication error;

b. Patient death or serious disability associated with a hemolytic reaction due to the administration of ABO-incompatible blood or blood products;

c. Maternal death or serious disability associated with labor or delivery on a low-risk pregnancy while being cared for in a health care facility;

d. Patient death or serious disability associated with hypoglycemia, the onset of which occurs while the patient is being cared for in a health care facility;

e. Death or serious disability associated with failure to identify and treat hyperbilirubinemia in neonates;

f. Stage 3 or 4 pressure ulcers acquired after admission to a health care facility; and

g. Patient death or serious disability due to spinal manipulative therapy.

5. Environmental

a. Patient death or serious disability associated with an electric shock while being cared for in a health care facility;

b. Any incident in which a line designated for oxygen or other gas to be delivered to a patient contains the wrong gas or is contaminated by toxic substance;

c. Patient death or serious disability associated with a burn incurred from any source while being cared for in a health care facility;

d. Patient death associated with a fall while being cared for in a health care facility; and

e. Patient death or serious disability associated with the use of restraints or bedrails while being cared for in a health care facility.

6. Criminal

a. Any instance of care ordered by or provided by someone impersonating a physician, nurse, pharmacist, or other licensed health care provider;

b. Abduction of a patient of any age;

c. Sexual assault on a patient within or on the grounds of a health care facility; and

d. Death or significant injury of a patient or staff member resulting from a physical assault that occurs within or on the grounds of a health care facility.

When the event is an "ongoing urgent or emergent threat" to a patient, personnel, or visitor, the hospital must report the event to the Department within 24 hours of detection (rather than five days). In turn, the Department is charged with making an onsite investigation of any ongoing threat of imminent danger within the later of 48 hours or two business days from receipt of a report or complaint of an adverse event. The results of the investigation must be completed within 45 days and provided to the hospital and, if applicable, the individual who filed the complaint. The Department must conduct a yearly unannounced inspection of any hospital reporting an adverse event until the Department has determined the event has been resolved.

Beginning January 1, 2009, the Department is charged with making available to the public reports of substantiated adverse events, as well as any subsequent investigations or inspections. This information must be posted on the Department’s internet website by January 1, 2015. Information provided by the Department pursuant to the law must protect the confidentiality of the patient and health care professionals involved. Finally, the Department is required to publicly report the number and timeliness of investigations of adverse events as part of its existing yearly analysis of Department staff and systems. The new law does not expand current legal privileges or confidentiality protections offered by California law.

B. Inspection Requirements

Effective July 1, 2007, accredited health facilities enrolled in the Medicare or Medicaid programs will no longer be exempt from periodic inspections by the Department for compliance with state licensure regulations. The new law requires that the Department conduct unannounced inspections applying both state and federal regulations to every licensed health care facility, regardless of how the facility was certified to participate in the Medicare or Medicaid Programs. Beginning on the effective date of the rule, July 1, 2007, the Department is required to commence surprise inspections of health care facilities to ensure that California’s licensure standards are upheld. The frequency of the inspections is dependent upon the type of facility and any intervening complaints or changes in administrator or director of nursing.7

All general acute care hospitals, acute psychiatric hospitals, and special hospitals are subject to inspection no less than once every three years or "as often as necessary to ensure the quality of care being provided."8 All other health facilities licensed by the Department (e.g., nursing facilities, intermediate care facilities) are subject to inspection no less than once every two years or as the Department determines necessary to protect the well-being of a facility’s patients. Long-term health care facilities cited for class "AA," "A," or "B" violations or active patient complaints are subject to more frequent inspections. Long-term health care facilities are also subject to an abbreviated inspection within 90 days of receipt of notice of a change in administrator or director of nursing services.

Every health facility licensed by the Department receiving a notice of deficiency constituting immediate jeopardy to the health or safety of a patient must present the Department with a plan of correction. A deficiency causing "immediate jeopardy" is defined as a "situation in which the licensee’s noncompliance with one or more requirements of licensure has caused, or is likely to cause, serious injury or death to the patient."9

The Department is required to adopt regulations that specify the circumstances under which an administrative penalty is assessed and the amount of that penalty. In drafting the regulations, the Department must consider at least the following mitigating or aggravating conditions:

  • Patient’s physical and mental condition;
  • Probability and severity of the risk the violation presented to the patient;
  • Actual financial harm to patient;
  • Nature, scope and severity of the violation;
  • Facility’s history of compliance;
  • Contributing factors that were beyond the facility’s control;
  • Willfulness of the violation; and
  • Whether the facility took steps to immediately correct the violation and prevent reoccurrence.

Deficiencies occurring after the effective date of the Department’s regulations are subject to an administrative penalty not to exceed $50,000 per violation. However, deficiencies occurring on or after January 1, 2007, are subject to an administrative penalty not to exceed $25,000 per violation regardless of whether the Department has adopted the regulations discussed above. Violations of the statute or regulations governing licensed health facilities not constituting immediate jeopardy are subject to an administrative penalty not to exceed $17,500 per violation.

Any health care facility cited for a deficiency or assessed an administrative penalty may appeal the decision by requesting a hearing within 10 working days of the Department’s finding or assessment of a fee. Any administrative penalty is set aside until the facility’s appeals have been exhausted and the Department’s position upheld.

IV. Conclusion

Given the heightened policymaking activity in this area, health care providers should be familiar with the reporting requirements in their state and be aware of recent changes in the law. Impacted health care providers in California should ensure that their policies and procedures adequately detail the proper steps for reporting an adverse event consistent with the new law.

Additionally, California health care providers who were previously exempt from state inspections because of their Medicare or Medicaid accreditation status should prepare for unannounced state inspections and review their facility’s compliance with state licensing regulations. Long-term health care facilities should be prepared for an abbreviated inspection following any change in the administrator or the director of nursing services.


1 To be codified at California Health and Safety Code §§ 1279.1-1279.3 and 1280.4.

2 To be codified at California Health and Safety Code §§ 1279-1280.6 and 1422.

3 Institute of Medicine, To Err is Human: Building a Safer Health System (1999).

4 See e.g., Or. Rev. Stat. § 442.820 (establishing a voluntary reporting system); Mass. Gen. Laws ch. 6A, § 16E (creating a center for the study and coordination of patient safety efforts).

5 For additional information regarding the federal patient safety law, see Reed Smith’s September 8, 2005 Health Care Client Memo entitled "Patient Safety and Quality Improvement Act of 2005 Signed into Law," which is available on our web site at http://www.reedsmith.com/_db/_documents/hc0509.pdf.

6 Centers for Medicare & Medicaid Services, Fact Sheet, Eliminating Serious, Preventable and Costly Medical Errors – Never Events (May 18, 2006).

7 According to existing California law, the Department must conduct an inspection within 10 days of receiving a written or oral complaint concerning a long-term care facility. See Cal. Health & Safety Code § 1420. Despite this statutory requirement, the Department has been unable to conduct timely inspections on all facilities who are the subject of a complaint. In a recent lawsuit filed by the California Advocates for Nursing Home Reform and two families, the Department was order to significantly accelerate its investigations of complaints of nursing home abuse and neglect. See California Advocates for Nursing Home Reform et al. v. California Department of Health Services, No. CPF-05-505749, 2006 WL 2829865 (Cal. Super. Ct. Sept. 27, 2006). The Department has eight months to conduct an initial onsite investigation of all existing complains and must conduct investigations of 80 percent of new complaints within 10 working days of receipt of the complaint. See id.

8 Senate Bill 1312 to be codified at Cal. Health & Safety Code § 1279(c).

9 Cal. Health & Safety Code § 1280.1(c).

This article is presented for informational purposes only and is not intended to constitute legal advice.

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