BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 542
A
AUTHOR: Feuer
B
AMENDED: June 23, 2010
HEARING DATE: June 30, 2010
5
CONSULTANT:
4
Hansel/
2
SUBJECT
Hospital acquired conditions
SUMMARY
Requires the Department of Health Care Services (DHCS) to
convene a technical working group to evaluate options for
implementing non-payment policies and procedures for
hospital acquired conditions (HACs) for the fee-for-service
Medi-Cal program consistent with federal laws and
regulations. Requires DHCS to implement non-payment
policies and procedures for HACs for the fee-for-service
Medi-Cal program by July 1, 2011 that are consistent with
the Patient Protection and Affordable Care Act (PPACA) and
to consider the recommendations of the technical working
group. Requires MRMIB to implement non-payment policies
and practices, consistent with those adopted by DHCS for
the Medi-Cal program, for the programs it administers.
Requires hospitals to report to their governing boards
specified information concerning adverse events and
hospital acquired conditions.
CHANGES TO EXISTING LAW
Existing federal law:
Requires, under the federal Deficit Reduction Act of 2005
Continued---
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or "DRA," the Secretary of the Department of Health and
Human Services to select Medicare diagnosis codes
associated with at least two hospital-acquired conditions
(HACs) that are: (a) high cost or high volume, or both; (b)
result in the assignment of a patient to a
diagnosis-related group (DRGs are generally how Medicare
pays hospitals) that has a higher payment when the code is
present as a secondary diagnosis; and, (c) are conditions
that could reasonably have been prevented through the
application of evidence-based guidelines.
Provides, pursuant to regulations adopted by the Centers
for Medicare and Medicaid Services (CMS), for the
non-payment under the Medicare program for specified
categories of HACs, when they are present on the admission
of the patient. Instead, the case is paid as though the
secondary diagnosis was not present. This requirement
applies to hospital discharges on or after October 1, 2008.
Requires, under the Patient Protection and Affordable Care
Act (Public Law 111 - 148) (PPACA), the Secretary of HHS to
adopt regulations that are effective July 1, 2011, that
prohibit payment for HACs in the Medicaid program. Directs
the Secretary to apply to state Medicaid plans the Medicare
non-payment requirements as appropriate for the Medicaid
program, and to exclude certain conditions if the Secretary
finds them to be inapplicable to Medicaid beneficiaries.
Existing state law:
Establishes the Medi-Cal program as California's Medicaid
program, administered by the Department of Health Care
Services (DHCS), which provides comprehensive health care
coverage for low-income individuals and their families;
pregnant women; elderly, blind, or disabled persons;
nursing home residents; and refugees who meet specified
eligibility criteria.
Establishes various programs, including the Healthy
Families program, the Major Risk Medical Insurance Program
(MRMIP), the Access for Infants and Mothers program (AIM)
and the Medi-Cal program, which provide health coverage to
individuals meeting specified eligibility criteria, and
which are administered by the Managed Risk Medical
Insurance Board (MRMIB).
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Requires the Department of Public Health (DPH) to license
and inspect health facilities, including general acute care
hospitals, acute psychiatric hospitals, and special
hospitals (hospitals).
Requires hospitals to report an adverse event to DHS no
later than five days after the adverse event has been
detected, or, if the event is an ongoing urgent or
emergency threat to the welfare, health, or safety of
patients, personnel, or visitors, not later than 24 hours
after the adverse event has been detected. Existing state
law defines an "adverse event" to include any of 27
specified occurrences.
This bill:
Requires DHCS to convene a technical working group to
evaluate options for implementing non-payment policies and
procedures for hospital acquired conditions (HACs) for the
fee-for-service Medi-Cal program consistent with federal
laws and regulations, including, but not limited to the
PPACA.
Requires by February 1, 2011, the technical working group
to provide recommendations to the Director of DHCS, the
Secretary of the California Health and Human Services
Agency, and the Legislature on the best options for these
purposes. Sunsets these provisions on February 1, 2015.
Requires the technical working group to be made up of
consumer advocates, technical experts, physicians, hospital
representatives, employers, representatives of hospital
staff, and departmental representatives, as specified.
Requires DHCS to implement non-payment policies and
procedures for HACs for the fee-for-service Medi-Cal
program by July 1, 2011 that are consistent with the PPACA
and, in doing so, to strongly consider the recommendations
of the technical working group.
Provides that these policies shall apply to payments to
health care facilities, defined as general acute care,
acute psychiatric, and special hospitals, and surgical
clinics. Provides that DHCS shall only do this to the
extent federal financial participation is not jeopardized
for programs receiving federal funds.
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Requires Medi-Cal managed care plans to implement similar
non-payment policies through their contracts with health
care facilities.
Requires health facilities subject to Medi-Cal non-payment
policies to exclude costs related to HACs from specified
cost reports that they are required to file.
Requires MRMIB to implement non-payment policies and
practices, consistent with those adopted by DHCS for the
Medi-Cal program, for Healthy Families, AIM, and MRMIP.
Allows DHCS and MRMIB to contract with a peer review
organization that meets applicable state and federal
requirements for the purposes of carrying out non-payment
policies and practices adopted pursuant to the bill.
Prohibits health care facilities that are subject to the
non-payment policies established pursuant to the bill from
charging a patient for care and services for which payment
is denied.
Provides that the bill's requirements on DHCS to establish
non-payment policies and procedures shall not be
interpreted or implemented in a way that would limit
patient access to needed health care services or payment to
a health facility for medically necessary follow-up care to
correct or treat complications or consequences of a
hospital acquired condition or for the care originally
sought by the patient.
Establishes several requirements pertaining to disclosure
and use of information associated with implementation of
the non-payment policies:
Provides that implementation shall not be construed to
authorize the disclosure of contract rates between health
care providers and payers or of information on the
relative or comparative cost to payers or purchasers of
health care services.
Provides that patient social security numbers and other
data elements DHCS determines may be used to determine
the identity of an individual patient shall not be deemed
public records.
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Provides that no person reporting data pursuant to the
Medi-Cal non-payment policies and procedures shall be
liable for damages in an action based on the use or
misuse of patient-identifiable data that has transmitted
to DHCS.
Provides that no communication of data or information to
DHCS shall constitute a waiver of the right to exclude
records from evidence that currently pertains to certain
health care settings, such as medical peer review bodies.
Provides that information, documents, and records from
original sources subject to discovery or introduction
into evidence shall not be immune from discovery or
evidence because the information, document, or record was
also provided to the DHCS pursuant to the Medi-Cal
non-payment policies.
Requires the medical director and the director of nursing
of each general acute care, acute psychiatric, and special
hospital to report annually, to the board of directors or
other similar hospital governing body, the following:
The number of adverse events and HACs that occurred in
the facility in the most recent 12-month period;
The outcomes for each patient involved; and,
A comparison to comparable institutions of rates of
adverse events and HACs, if this data exists and is
publicly available.
Provides that the communication of data or information by
an officer or employee of the hospital under the above
reporting provision shall not constitute a waiver of the
right to exclude records from evidence that currently
pertains in certain health care settings, such as medical
peer review bodies.
FISCAL IMPACT
According to the Assembly Appropriations Committee analysis
of the May 5, 2010 amended version of this bill:
One-time fee-supported special fund costs of $500,000,
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combined, to DMHC, CDI, DHCS, MRMIB and CalPERS to
establish non-payment policies and procedures, promulgate
regulations, and provide oversight related to the initial
requirements of this bill;
Unknown ongoing costs for administering agencies and
programs to provide oversight and support workload
related to updating payment prohibitions, and to handle
appeals; and,
Significant annual savings to Medi-Cal and HFP of more
than $10 million to the extent the payment prohibitions
reduce public costs. According to 2008 data, 1,500
adverse events were reported to DPH. The estimated
medical costs of these events were more than $50 million
and the Medi-Cal portion was more than $13 million (50
percent General Fund). Actual savings to payers may grow
as reporting strengthens. However, part of the policy
rationale for the payment prohibitions is to focus
attention on error prevention efforts. To the extent the
prohibitions improves care, savings to payers will be
less.
BACKGROUND AND DISCUSSION
According to the author, this bill will improve the quality
of health care in California hospitals by ensuring that the
most effective systems and safeguards are in place to
protect patients from preventable errors and other HACs.
These events include severe pressure ulcers, burns, and
retention of foreign objects (e.g., a sponge) inside a
patient after surgery, among other tragic events. The
author states that this bill ensures that there are
incentives for improving patient safety, and patients who
are the victims of such tragic events are not also
subjected to the added indignity of having to pay for them
as well.
The author cites the Institute of Medicine's 1999 report
that estimated as many as 98,000 people die each year as a
result of medical errors. The author states this report
led to a surge in research and interest in the patient
safety field over the last 10 years. In 2002, the National
Quality Forum (NQF) identified 27 adverse events that were
clearly identifiable and measurable, are significantly
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influenced by policies and procedures of hospitals, and are
of great concern to providers and patients. They include
such events as retention of objects (e.g., sponges) inside
a patient after surgery, medication errors, or surgery on
the wrong body part.
The author points out that CMS has adopted policies denying
Medicare reimbursement for 12 of these adverse events,
which they refer to as HACs, and many health plans, such as
Anthem and Aetna, are developing similar policies for the
private market. At least 11 states have enacted
non-payment policies through statute or other agreements.
Most hospital-acquired conditions are easily preventable
when systems and safeguards become part of the culture of
care. A recent international study found that surgical
deaths and complications dropped by almost 50 percent when
a simple, 19-item safety checklist was adopted for surgical
procedures. The author states that this bill ensures that
these types of evidence-based best practices are shared
with health professionals, and provides a financial
incentive for hospitals to implement these patient safety
innovations.
Medicare provisions related to HACs
In February 2006, President Bush signed the DRA into law.
One provision of the DRA requires the Secretary of the
Department of Health and Human Services to take steps to
prevent Medicare from paying hospitals for the additional
costs of treating patients who acquire specified conditions
during hospitalization. The DRA required CMS to select at
least two HACs that would be subject to a quality payment
adjustment. CMS consulted with the Centers for Disease
Control and Prevention (CDC) to identify the conditions
proposed for reduced payment beginning October 2008, and
additional conditions that would be considered for reduced
payment in subsequent years. Under the DRA, the CMS is
directed to identify conditions that meet all of the
following conditions:
Are associated with a high cost of treatment or high
occurrence rates within hospital settings;
Result in higher payment to the hospital when submitted
as a secondary diagnosis; and,
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Can reasonably be prevented by adoption and
implementation of evidence-based guidelines.
Pursuant to the DRA, for discharges occurring on or after
October 1, 2008, hospitals do not receive additional
Medicare payment for cases in which one of the selected
conditions was not "present on admission." In other words,
Medicare would pay the hospital as though the secondary
diagnosis were not present.
On July 31, 2008, CMS adopted regulations that included 10
categories of conditions that are subject to the HAC
payment provision. The 10 categories of HACs include:
Foreign object retained after surgery.
Air embolism.
Blood incompatibility.
Stage III and IV pressure ulcers.
Falls and trauma, including fractures, dislocations,
intracranial injuries, crushing injuries, burns, and
electric shock.
Manifestations of poor glycemic control.
Catheter-Associated Urinary Tract Infection.
Vascular Catheter-Associated Infection.
Surgical site infection following coronary artery bypass
graft surgery (mediastinitis), bariatric surgery, or
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certain orthopedic procedures.
Deep Vein Thrombosis (DVT)/Pulmonary Embolism (PE)
associated with total knee replacement or hip
replacement.
In addition, CMS initiated a process in 2008 to review
Medicare coverage of three so-called "never events"-surgery
on the wrong body part, surgery on the wrong patient, and
performing the wrong surgery on a patient.
In 2008, CMS also provided guidance to state Medicaid
Directors on payment policies for Medicaid when it is a
secondary payer for care to dual eligibles (persons
eligible for Medicare and Medicaid). The guidance states
that states wishing to avoid loss of federal payments for
treatment for dual eligible for which Medicare will not pay
may do so by amending their state plans to provide a
mechanism to limit attempts by providers to bill Medicaid
as a secondary payer.
Federal health care reform provisions pertaining to
non-payment for HACs in Medicaid
Section 2702 of the PPACA requires the Secretary of HHS to
identify current state practices that prohibit payment for
health care-acquired conditions and to incorporate them, or
elements of them in regulations governing the Medicaid
program, which are required to be effective as of July 1,
2011. Section 2702 requires that the regulations must
ensure that the prohibition on payment for health
care-acquired conditions does not result in a loss of
access to care or services for Medicaid beneficiaries. The
Secretary is further directed to apply to state Medicaid
plans the Medicare non-payment requirements
as appropriate for the Medicaid program, and is allowed to
exclude certain conditions for which non-payment is
required under the Medicare program if the Secretary finds
them to be inapplicable to Medicaid beneficiaries.
Adoption of non-payment policies by insurers and other
states
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A number of insurers have implemented policies to withhold
payments to hospitals for certain serious, preventable
errors. In 2009, Aetna began not paying facility charges
for three basic "never events" -- surgery on the wrong
patient, surgery on the wrong body part, and the wrong
surgical procedure - and began not paying charges directly
related or solely related to eight other serious,
preventable errors. Anthem Blue Cross withholds payment
for four basic "never events"-surgery on the wrong patient,
surgery on the wrong body part, the wrong surgical
procedure, and retention of a foreign object after surgery.
Several states have implemented hospital non-payment
policies for selected HACs, in some cases focused on
preventable serious adverse events.
Adverse event reporting
Pursuant to SB 1301 (Alquist), Chapter 647, Statutes of
2006, state law requires hospitals to report adverse events
to DPH. California's definition of "adverse events" was
adapted from the list of events developed by the NQF in
conjunction with CMS. Additionally, state law (SB 1058
(Alquist), Chapter 296, Statutes of 2008) requires
specified health care-associated bloodstream and surgical
infections to be reported by hospitals to DPH. Other than
deep vein thrombosis and pulmonary embolism following
certain orthopedic procedures and certain actions under
falls and trauma, the current list of HACs from CMS are
reportable to DPH under state law.
Prior legislation
AB 2146 (Feuer) of 2007 -08 would have prohibited hospitals
and health care professionals from billing a patient or a
payer, as defined, for care or services provided during
which occurred or that resulted in specified adverse events
(instead of HAC in this bill). AB 2146 was held on the
Senate Appropriations suspense file.
SB 1058 (Alquist), Chapter 296, Statutes of 2008,
established the Medical Facility Infection Control and
Prevention Act, which requires hospitals to implement
certain procedures for screening, prevention, and reporting
of specified health facility acquired infections. SB 1058
also requires DPH to establish an internet-based public
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reporting system that provides information regarding the
relative incidence of central line associated blood stream
infections, surgical site infections, ventilator acquired
pneumonia, and catheter acquired urinary tract infections,
as specified.
SB 1301 (Alquist), Chapter 647, Statutes of 2006, requires
general acute care, acute psychiatric, and special
hospitals to report adverse events, as defined, to DPH no
later than five days after the event has been detected, or
in the case of an urgent or emergent threat, not later than
24 hours after the adverse event has been detected.
SB 1312 (Alquist), Chapter 395, Statutes of 2006,
authorizes DHS to assess administrative penalties against
hospitals for deficiencies that constitute immediate
jeopardy to the health and safety of a patient. AB 1312
also requires inspections and investigations of long-term
care facilities certified by the Medicare or Medicaid
program to assess their compliance with federal standards
and California statutes and regulations. Finally, SB 1312
eliminated an exemption for specified health care
facilities from periodic inspections by DHS.
SB 739 (Speier), Chapter 526, Statutes of 2006, created a
state Healthcare Associated Infection (HAI) advisory
committee to make recommendations regarding reporting cases
of HAI in hospitals. The bill also requires each general
acute care hospital, after January 1, 2008, to implement
and annually report to DPH its implementation of infection
surveillance and infection prevention process measures that
have been recommended by the Centers for Disease Control
and Prevention's Healthcare Infection Control Practices
Advisory Committee as suitable for a mandatory public
reporting program.
Arguments in support
Health Access California (Health Access), and the Service
Employees International Union (SEIU) argue in support that
this bill would end the practice of paying for "never"
events. Health Access and SEIU state "never" events
describe several dozen specific events that should never
happen in health care, and this bill operates on the same
principle that Medicare is adopting: doctors and hospitals
should not be paid for preventable "never" events.
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Taking a support in concept position, the California
Hospital Association (CHA) stresses that any state
non-payment methodology for HACs must conform to the
methodology adopted by CMS for the Medicare and Medicaid
programs, and should be applied to the Medi-Cal
fee-for-service program, and not to Medi-Cal managed care
contracts. CHA states that the make up of the proposed
technical advisory group should be limited to technical
experts that DHCS deems necessary to assist it in
developing regulations and, assuming the focus of the
effort is on adopting non-payment policies for the Medi-Cal
fee-for-service program, should not include persons who are
involved in managed health care delivery. CHA additionally
questions the inclusion of language authorizing MRMIB and
DHCS to contract with a peer review organization to carry
out the non-payment policies.
CHA also states that it believes that making the
determination that an event is a non-pay event should not
be treated as an admission of fault and should not be
discoverable or admissible in court and requests a
technical amendment to clarify that hospitals may not
accept and retain payments from patients related to care
provided for HACs.
Arguments in opposition
The Doctors Company states that it opposes AB 542 because
it does not safeguard information about non-payment from
being used as an admission of liability or from being
admissible or discoverable in connection with claims
alleging professional negligence and expresses concern that
absence language to this effect, barring charging of
payment for HACs implies negligence on the part of a
practitioner, and notes that privileged protection of
non-payment information is provided in the bill when the
information is communicated internally within a hospital to
its governing body.
Oppose unless amended
Taking an oppose unless amended position, the California
Association of Professional Liability Insurers (CAPLI)
states it's concern that non-payment determinations should
not be used to set a standard of care in liability actions.
CAPLI states that a determination of non-payment could be
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regarded as a de facto determination of fault, which is
contrary to current practice in malpractice litigation, in
which the plaintiff bears the burden of proof of
establishing that the provider deviated from the standard
of care. CAPLI urges that the bill include a provision
that a non-payment shall not constitute a determination
that the provider has not met the applicable standard of
care, or be admissible as evidence.
PRIOR ACTIONS
Assembly Floor: 50-26
Assembly Appropriations:12-5
Assembly Health: 13-3
COMMENTS
1. Use of medical review organizations. The bill contains
authority for DHCS and MRMIB to contract with utilization
and quality control peer review organizations for the
purposes of carrying out the non-payment policies that DHCS
is required to develop pursuant to the bill. However, it
is not clear that the regulations CMS develops will
necessitate review of individual patient cases. A
suggested amendment would be to instead include
consideration of the role of the organizations in the
functions of the technical advisory committee established
by the bill.
2. Required cost reports. The bill requires health care
facilities to exclude from the annual disclosure reports
and Medi-Cal cost reports costs related to HACs, subject to
the non-payment policies implemented pursuant to the bill.
However, it is not clear that the regulations CMS develops
will require this. Instead, the regulations may require or
allow DHCS to adjust the payment to account for the HAC in
a manner that does not necessitate separating costs out in
the cost reports. A suggested amendment would be to
instead include consideration of changes in the cost
reports in the functions of the technical advisory
committee.
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3. Effective date of regulations. The bill requires DHCS
to implement non-payment policies for the fee-for-service
Medi-Cal program by July 1, 2011. The PPACA directs the
Secretary of HHS to adopt effective regulations by that
date, but it is not clear that the regulations will require
states to actually have in place non-payment policies by
that date. A suggested amendment would be to remove the
July 1, 2011 date, allow the state's implementation to
coincide with the effective date of the federal
requirements.
4. Make-up of technical advisory committee. The bill
requires representation of several entities on the advisory
committee, but does not require that they be experts in
hospital reimbursement practices. A suggested amendment
would be to require that all of the outside appointments to
the committee have expertise in this area.
5. Patient confidentiality provisions. The bill provides
that patient Social Security numbers and other data
elements that DHCS determines may be used to determine the
identity of an individual patient shall not be deemed to be
public records. However, existing state and federal
medical confidentiality laws already prescribe when and
under what conditions individually identifying information
may be disclosed. A suggested amendment would be to defer
to existing state and federal medical confidentiality law
on this point.
6. Scope of health care facilities affected by the bill.
The bill would apply the non-payment policies that DHCS
develops to acute care, acute psychiatric, and special
hospitals, and also to licensed surgical clinics. However,
licensed surgical clinics are currently not subject to the
Medicare non-payment policies, and it is not clear that
they will be subject to the forthcoming federal regulations
establishing non-payment policies in the Medicaid program.
A suggested amendment would be to require the scope of
facilities to be that required by the federal regulations,
and to include consideration of additional facilities that
would be subject to the nonpayment policies in the
functions of the technical advisory committee established
by the bill.
7. Suggested technical amendments:
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a. Change references to "hospital acquired conditions" in
subdivision (f) of the Section 1 of the bill (findings and
declarations) to "hospital acquired conditions that are
reasonably preventable by adoption and implementation of
evidence-based guidelines."
b. On page 4, line 38, amend as follows:
(2) The outcomes for each patient involved, if known.
c. In the sections directing health facilities to not
charge patients for care and services for which payment is
denied, instead direct health facilities to not charge a
patient any applicable cost-sharing amounts for care or
services for which payment is denied.
d. Throughout the bill, change references to "health
facilities" to "health care facilities."
e. Delete lines 38 - 39 on page 13 and lines 1 - 2 on page
14 as redundant.
f. On page 14, lines 3 - 9, delete lines 6 - 9. It's not
clear what type of disclosure of comparative costs to
payers is going to be required or allowed by the federal
regulations.
g. On page 14, lines 16 - 20, amend as follows:
(2) No person reporting data pursuant to this article
shall be liable for damages in an action based on the use
or misuse of patient-identifiable data by the department
that has been properly mailed or otherwise properly
transmitted to the department pursuant to the requirements
of this article.
8. Payment methodology in Medi-Cal versus Medicare. One
of the challenges to implementing non-payment policies in
many states' Medicaid programs, including California's, is
that hospitals are paid per diem payments instead of being
paid through diagnosis related groups or DRGs, which are
acuity-based, capitated payments that cover the entire
range of services related to a particular diagnosis. Under
a DRG payment methodology, it is relatively straightforward
to adjust the payment to account for an HAC that was not
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present upon the admission of the patient. It is not clear
at this point whether the CMS non-payment regulations that
take effect on July 1, 2011 will require states to change
their reimbursement systems for hospitals to a DRG based
system, or allow states to continue to use fee-for-service
reimbursement systems that incorporate methods of payment
adjustment that are comparable to the adjustments that
occur in a DRG based system. California's proposed
Medi-Cal waiver plan includes provisions to move the state
eventually to a DRG-based payment system for hospital
payments.
POSITIONS
Support: California Hospital Association (in concept)
Health Access
Service Employees International Union
Support (prior version):
American Federation of State, County and Municipal
Employees, AFL-CIO Blue Shield of
California
California Association of Health Plans (if amended)
CalPERS Board of Administration (if
amended)
California School Employees Association
Consumers Union
Oppose: California Association of Professional Liability
Insurers (unless amended)
The Doctors Company
California Orthopedic Association (unless
amended)
Oppose (prior version):
California Children's Hospital Association (unless
amended)
Children's Specialty Care Coalition (unless
amended)
Association of California Healthcare Districts
California Chapter of the American College of
Emergency Physicians (unless
amended)
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California Society of Anesthesiologists
University of California (unless amended)