SECTION 1. Section 8 of Chapter 118E of the General Laws, as appearing in the 2010 Official Edition, is hereby amended by inserting after the definition of “Medical benefits” the following new definition:

“Observation Services”, a defined set of clinically appropriate health care services which include ongoing assessment, treatment, reassessment, furnished while a decision is being made regarding whether recipients of medical assistance will require inpatient hospitalization or whether they are able to be discharged from the hospital. 

SECTION 2. Section 12 of chapter 118E of the General Laws, as so appearing, is further amended by inserting at the end thereof the following new paragraph:-

The division and its contractors shall classify a medical assistance recipient as requiring or receiving observation services based on the medical judgment of the treating health care provider after due consideration of the recipient’s initial presenting signs and symptoms.  If the treating health care provider anticipates greater than 24 hours diagnostic assessment, the recipient shall be deemed admitted to the facility as an inpatient; provided however, that the treating healthcare provider may authorize observation status for services provided beyond 24 hours.  The division and its contractors shall provide the health care provider an opportunity to seek reconsideration of an adverse determination from a clinical peer reviewer, as defined in chapter 176O of the general laws, should the division seek to retroactively reclassify the recipient from inpatient to observation, for either a portion or the entire stay, based on the division’s clinical review criteria.

SECTION 3. Section 1 of chapter 176O of the General Laws, as so appearing, is hereby amended by inserting after the definition of “network” the following new definition: 

“Observation Services”, a defined set of clinically appropriate health care services which include ongoing assessment, treatment, reassessment, furnished while a decision is being made regarding whether the insured will require further inpatient hospitalization or whether they are able to be discharged from the hospital.

SECTION 4. Section 12 of chapter 176O, as so appearing, is further amended by inserting the following new subsection (f):

(f) The carrier and its contractors shall classify an insured as requiring or receiving observation services based on the medical judgment of the treating health care provider after due consideration of the insured’s initial presenting signs and symptoms.  If the treating health care provider anticipates greater than 24 hours diagnostic assessment, the insured shall be deemed admitted to the facility as an inpatient; provided however, that the treating healthcare provider may authorize observation status for services provided beyond 24 hours.  The carrier and its contractors shall provide the health care provider an opportunity to seek reconsideration of an adverse determination from a clinical peer reviewer should the carrier seek to retroactively reclassify the insured from an approved inpatient authorization to observation, for either a portion or the entire stay, based on the carrier’s clinical review criteria.

SECTION 5.  The commissioner of insurance and the office of medicaid shall promulgate regulations, that are consistent with the Medicare interpretive guidelines for applying observation services, to enforce the provisions of this act no later than 90 days after the effective date of the act, which shall be effective for provider contracts which are entered into, renewed, or amended on or after the regulations effective date.