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State of California—Health and Human Services Agency
California Department of Public Health

AFL 17-03
February 10, 2017

General Acute Care Hospitals

Senate Bill (SB) 1076: General Acute Care Hospitals (GACH): Observation Services – Health and Safety Code section 1253.7

All Facilities Letter (AFL) Summary

  • This revised AFL clarifies the application process for an observation services unit.
  • This AFL informs providers of the chaptering of SB 1076, effective January 1, 2017, which permits hospitals to establish one or more outpatient observation units. Hospitals must mark the units with signage identifying the unit as an outpatient area.
  • SB 1076 requires hospitals to provide written notice to any individual receiving observation services.
  • SB 1076 also requires the Office of Statewide Health Planning and Development (OSHPD) to, upon request, publish to its website summaries of individual and aggregate facility data on observation services.

SB 1076 - GACH: Observation Services, effective January 1, 2017, permits hospitals to establish one or more outpatient observation units to provide outpatient observation services to patients. An observation unit must comply with the same licensed nurse-to-patient ratios as emergency services.


SB 1076 defines "observation services" as outpatient services provided by a GACH to patients 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.

Observation services may 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 inpatient admission to the hospital

An "observation unit" is an area in which the facility provides observation services in a setting outside of any inpatient unit and that is not part of an emergency department.

Signage Requirement

Observation units must be marked with signage identifying the observation unit area as an outpatient area. The signage must use the term "outpatient" in the title of the designated area to indicate clearly to all patients and family members that the observation services provided in the unit are not inpatient services.

Written Notice Requirement

The facility is responsible for providing written notice to a patient as soon as practicable that he or she is on observation status whenever a patient:

  • is receiving observation services in an inpatient unit of a hospital
  • is receiving observation services in an observation unit
  • has a change in status from inpatient to observation

The notice must state that observation care is provided on an outpatient basis, which may affect his or her health care coverage reimbursement.

Licensed Nurse to Patient Ratio Requirement

An outpatient observation unit must comply with the same licensed nurse-to-patient ratios as emergency services.

The licensed nurse-to-patient ratio in an observation unit must be 1:4 or fewer at all times when patients are receiving treatment. There may be no fewer than two licensed nurses physically present in the observation unit when a patient is present.

Applying to Operate an Observation Services Unit

Facilities choosing to operate an observation services unit must obtain L&C approval prior to operation. Hospitals must submit the following documents to the department:

NOTE: L&C will promulgate supplemental service regulations for the operation of an observation unit.

OSHPD Data Requirements

The Health Data and Advisory Council Consolidation Act (Act) requires OSHPD to compile and publish summaries of financial and patient data. SB 1076 revises the Act to require OSHPD to include summaries of observation services data upon request. The summaries must be posted on OSHPD’s internet website.

Facilities are responsible for following all applicable laws. The CDPH’s failure to expressly notify facilities of statutory or regulatory requirements does not relieve facilities of their responsibility for following all California and federal laws and regulations.
If you have any questions, please contact the CAU at (916) 552-8632.



Original signed by Scott Vivona for

Jean Iacino
Deputy Director

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