1. (1) Observation services are post-stabilization services appropriate for short-term treatments, assessment, and re-assessment of those patients for whom diagnosis and a determination concerning inpatient admission, discharge, or transfer can reasonably be expected within 48 hours.
2. (2) If observation services are provided, the services shall be provided in a manner which protects the health and safety of the patients in accordance with generally accepted standards of medical practice.
3. (3) Direct referral is defined as a patient referred to the hospital for observation services by a nursing home, hospital outpatient clinic, diagnostic and treatment center, private practice physician or appropriately licensed practitioner, without receiving emergency room or critical care services on the day observation care begins. The referring practitioner must be a licensed physician or appropriately licensed practitioner and must have conducted a physical assessment of the patient within the previous eight hours from the referral.
4. (4) Patients may be assigned to observation services only by order of a physician or appropriately licensed practitioner.

5. (5) Patients may be assigned to observation services only through the emergency department or by direct referral in accordance with hospital policies, procedures and bylaws, in conformance with applicable statutes and regulations.

   (b) Organization and notice.

6. (1) The medical staff shall develop and implement written policies and procedures, approved by the governing body, that are based on the clinical needs of the patient, that shall specify:

   1. (i) the organizational structure for providing observation services, including the specification of authority and accountability of the services;
   2. (ii) the proper clinical location for the care of a patient requiring observation services;
   3. (iii) the appropriate medical and administrative oversight of observation services;
   4. (iv) clinical criteria for observation assignment and discharge;
   5. (v) assignment of a physician, nurse practitioner, or physician assistant who will be responsible for the care of the patient and timely discharge from observation services; and
   6. (vi) integration with related services and quality assurance activities of the hospital.
7. (2) The hospital, in conjunction with the discharge planning program of the hospital, shall establish and implement written criteria and guidelines specifying the circumstances, the actions to be taken, and the appropriate contact agencies and individuals to accomplish adequate discharge planning for persons in need of post observation treatment or services but not in need of inpatient hospital care.
8. (3) Patients in observation shall be cared for by staff appropriately trained and in sufficient numbers to meet the needs of the patients.

9. (4) Patients being assigned to the observation services, or the patient representative, shall be provided with an oral and written notice within 24 hours of such placement that the patient is not admitted to the hospital and is under observation status. The hospital shall make a good faith effort to obtain written acknowledgment of receipt of the notice by the patient or the patient representative, and if not obtained, document its good faith efforts to obtain such acknowledgment and the reason why the acknowledgment was not obtained. Such written notice shall include, but not be limited to the following information:

   1. (i) a statement that observation status may affect the patient’s Medicare, Medicaid and/or private insurance coverage for the current hospital services, including medications and other pharmaceutical supplies, as well as coverage for any subsequent discharge to a skilled nursing facility or home and community based care; and

   2. (ii) that the patient should contact his or her insurance plan to better understand the implications of being placed in observation status.

      (c) Locations.

      Hospitals may provide observation services in the following locations:

10. (1) inpatient beds;
11. (2) distinct observation units; or

12. (3) in a hospital designated as a critical access hospital pursuant to subpart F of part 485 of title 42 of the Code of Federal Regulations or a sole community hospital pursuant to section 412.92 of title 42 of the Code of Federal Regulations, or any successor provisions, observation services may be provided in the emergency department.

    (d) Distinct observation units.

13. (1) Physical standards:

    1. (i) The observation unit shall comply with the applicable provisions of Part 711 and Subpart 712-2 and section 712-2.4 of this Title for construction projects approved or completed after January 1, 2011, except that the unit need not be adjacent to the emergency department.
    2. (ii) Observation unit beds shall not be counted within the State certified bed capacity of the hospital and shall be exempt from the public need provisions of Part 709 of this Title.
    3. (iii) The observation unit shall be marked with a clear and conspicuous sign that states: “This is an observation unit for visits of up to 48 hours. Patients in this unit are not admitted for inpatient services.”

14. (2) Any hospital seeking to establish a distinct observation unit shall, not less than 90 days prior:

    1. (i) if no construction, as defined in subdivision 5 of section 2801 of the Public Health Law, will be needed, no construction waivers are being requested, and no service will be eliminated, notify the department in writing of the general location of the unit and the number of beds; and submit a certification from a licensed architect or engineer, in the form specified by the department, that the space complies with the applicable provisions of Part 711 and Subpart 712-2 and section 712-2.4 of this Title for construction projects approved or completed after January 1, 2011; or

    2. (ii) if construction, as defined in subdivision 5 of section 2801 of the Public Health Law, will be needed, or construction waivers are being requested, or a service will be eliminated:

       1. (a) submit a request for limited review under section 710.1(c)(5) of this Title, provided that for purposes of Part 710 of this Title, a construction project involving only the creation of an observation unit and the addition of observation unit beds shall not be subject to review under section 710.1(c)(2) or (3) of this Title, unless the total project cost exceeds $15 million or $6 million respectively; and
       2. (b) comply with the applicable provisions of Part 711 and Subpart 712-2 and section 712-2.4 of this Title for construction projects approved or completed after January 1, 2011.
15. (3) Any hospital operating an observation unit pursuant to a waiver granted by the department shall be required to comply with the provisions of this subdivision within 12 months of its effective date.

(a) General.