BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                  SB 1322
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          Date of Hearing:  June 24, 2014

                            ASSEMBLY COMMITTEE ON HEALTH
                                 Richard Pan, Chair
                 SB 1322 (Ed Hernandez) - As Amended:  June 17, 2014

           SENATE VOTE :  Not relevant.
          SUBJECT  :  California Health Care Cost and Quality Database.

           SUMMARY  :  Creates the California Health Care Cost and Quality  
          Database (CQDB) to receive and report information from all types  
          of health care entities.  Specifically,  this bill  :  

          1)Requires the Secretary of California Health and Human Services  
            Agency (CHHSA), by January 1, 2016, to use a competitive  
            process to contract with one or more private, independent,  
            nonprofit organizations to establish and administer the CQDB.   
            Exempts this contract from provisions of the Public Contract  
            Code governing state agencies, as specified, and from review  
            or approval by the Department of General Services.

          2)Requires the contract to include:

             a)   A requirement that the nonprofit organization(s) do all  
               of the following:

               i)     Develop methodologies for the collection,  
                 validation, refinement, analysis, comparison, review,  
                 reporting, and improvement of health care data submitted  
                 by health care entities that are validated, recognized as  
                 reliable, and meet industry and research standards;

               ii)    Receive information from all types of health care  
                 entities and report that information in a form that  
                 allows valid comparisons across care delivery systems;  

               iii)   Comply with the requirements governing provider and  
                 supplier requests for error correction established  
                 pursuant to federal regulations governing qualified  
                 entities for receiving Medicare claims data.  

             b)   A prohibition on using data received for any purpose  
               other than what is specified in this bill or in the  


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             c)   A prohibition on receiving funding from outside sources  
               to accomplish the purposes of this bill; and,

             d)   A requirement that the nonprofit organization(s)  
               identify the type of data, purpose of use, and entities and  
               individuals that report to or have access to the CQDB.

          3)Requires health plans and insurers, as specified, including  
            self-insured employers and multiemployer self-insured plans;  
            suppliers; and providers, as specified, to provide both of the  
            following to the CQDB:

             a)   Utilization data from insurers' medical, dental, and  
               pharmacy claims and encounter data from entities that do  
               not use claims data; and,

             b)   Pricing information for health care items and services  
               gathered from allowed charges for covered health care items  
               and services or, in the case of organizations that do not  
               use or produce individual claims, standard price lists.

          4)Requires disclosures of data under this bill to comply with  
            all applicable state and federal privacy laws, including, the  
            federal Health Insurance Portability and Accountability Act of  
            1996 (HIPAA) and the federal Health Information Technology for  
            Economic and Clinical Health Act.

          5)Requires policies and protocols that ensure protection of  
            privacy, security, and confidentiality of individually  
            identifiable health information.  Prohibits the disclosure of  
            unaggregated, individually identifiable health information.

          6)Requires the CQDB to collect, process, maintain, and analyze:  
            claims from private and public payers; electronic health  
            record systems; disease and chronic condition registries;  
            third-party surveys of quality and patient satisfaction;  
            reviews by licensing and accrediting bodies; and local and  
            regional public health data.  Requires collection of  
            aggregated payer and provider performance on validated  
            measures of clinical quality and patient experience, as  

          7)Requires the analysis in 6) above to include population-level  


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            data on prevention, screening, and wellness utilization;  
            behavioral and medical risk factors, interventions and  
            outcomes; chronic conditions, management, and outcomes; and  
            trends in utilization of procedures for treatment of similar  
            conditions to evaluate medical appropriateness.  Requires the  
            analysis to include data that permits consideration of  
            socioeconomic status and disparities, as specified.

          8)By 2018, requires the CQDB to make publicly available a  
            web-based, searchable database that facilitates comparisons of  
            cost, quality, and satisfaction across payers, provider  
            organizations, and other suppliers of health care services.  

          9)Requires the CHHSA Secretary to convene an advisory committee  
            of health care stakeholders and experts, who receive no per  
            diem or reimbursement, to research and recommend strategies  
            for promoting high-quality health care, containing health care  
            costs, and make recommendations about the CQDB, including a  
            business plan for sustainability without using moneys from the  
            General Fund.  Creates requirements for the advisory committee  
            to hold open public meetings.

          10)Requires the advisory committee's findings to be reported to  
            the Legislature and the Governor, and to address a broad array  
            of health issues.

          11)Prohibits the advisory committee from being convened until  
            the Director of the Department of Finance determines that  
            sufficient private or federal funds have been received and  
            appropriated for that purpose.


          EXISTING LAW  :  

          1)Regulates health plans under the Knox-Keene Health Care  
            Service Plan Act of 1975 through the Department of Managed  
            Health Care and regulates health insurers under the Insurance  
            Code through the California Department of Insurance (CDI).

          2)Prohibits contracts between carriers and a licensed hospital  
            or health care facility owned by a licensed hospital from  
            containing any provision that restricts the ability of the  
            carrier from furnishing information to enrollees or insureds  
            concerning the cost range of procedures or the quality of  


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            services.  Provides hospitals at least 20 days in advance to  
            review the methodology and data, requires risk adjustment  
            factors for quality data, and requires an opportunity for a  
            hospital to provide a link on the carrier's Website where the  
            hospital's response to the data can be accessed.

          3)Makes Medicare data, under federal law, available for the  
            evaluation of the performance of providers of services and  
            suppliers, to qualified entities, defined as a public or  
            private entity that is qualified as determined by the  
            Secretary of the federal Department of Health and Human  
            Services (HHS), to use claims data to evaluate the performance  
            of providers of services and suppliers on measures of quality,  
            efficiency, effectiveness, and resource use, and agrees to  
            meet specified requirements and other requirements as the HHS  
            Secretary may specify, such as ensuring security of data.

          4)Prohibits a health plan from releasing any information to an  
            employer that would directly or indirectly indicate to the  
            employer that an employee is receiving or has received  
            services from a health care provider covered by the plan  
            unless authorized to do so by the employee.  

          5)Establishes under federal law, HIPAA, which among various  
            provisions, mandates industry-wide standards for health care  
            information on electronic billing and other processes; and  
            requires the protection and confidential handling of protected  
            health information.

          6)Under HIPAA, provides protections for individually  
            identifiable health information held by covered entities and  
            their business associates and gives patients an array of  
            rights with respect to that information.  Permits, under  
            HIPAA, the disclosure of certain health information as needed  
            for patient care and certain other purposes, including:   
            public health activities, research, prevention of a serious  
            threat to health or safety, law enforcement purposes, and  
            judicial and administrative proceedings.  Covered entities  
            under the HIPAA Privacy Rule are health care providers, health  
            plans, and health care clearinghouses.

          7)Under the Confidentiality of Medical Information Act,  
            prohibits providers of healthcare, health care service plans,  
            their contractors, and any business organized for the purpose  
            of maintaining medical information, from using medical  


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            information for any purpose other than providing health care  
            services, except as expressly authorized by the patient or as  
            otherwise required or authorized by law.  

           FISCAL EFFECT  :  This bill, as amended, has not yet been analyzed  
          by a fiscal committee.


          COMMENTS  :

           1)PURPOSE OF THIS BILL  .  The author of this bill writes, in  
            March 2014, the Senate Committee on Health convened health  
            care experts to discuss initiatives underway in California  
            directed at controlling the growth of health care costs.  The  
            informational hearing examined policy solutions to control  
            health care costs as millions of Californians obtain coverage  
            under the federal Patient Protection and Affordable Care Act  
            (ACA).  Testimony presented at the hearing illustrated the  
            complexity of the health care market and the array of  
            approaches to containing costs.  In addition to expanded  
            coverage, the author believes that, like past health care  
            reform efforts, a long-term, comprehensive action agenda for  
            California policymakers is necessary to ensure that health  
            care costs are appropriate and health care premiums are  
            affordable, especially given that the ACA contains a mandate  
            for individuals to purchase coverage.  The author states this  
            bill is intended to help make available valid performance  
            information to promote care that is safe, medically effective,  
            patient-centered, timely, efficient, affordable and equitable.  
             Additionally, this bill seeks to put provider cost and  
            performance information into the hands of consumers and  
            purchasers so that they are able to understand their financial  
            liability and realize the best quality and value available to  

           2)BACKGROUND  .  The Office of the Actuary in the Centers for  
            Medicare and Medicaid Services annually produces projections  
            of health care spending for categories within the National  
            Health Expenditure Accounts, which track health spending by  
            source of funds (for example, private health insurance,  
            Medicare, Medicaid), by type of service (hospital, physician,  
            prescription drugs, etc.), and by sponsor or payer  
            (businesses, households, governments).  Among the findings for  


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            National Health Expenditures in 2012-22 is a projection that  
            average annual growth in health spending will be 6.2% per year  
            for 2015 through 2022, largely as a result of the continued  
            implementation of the coverage expansions under the ACA,  
            faster projected economic growth, and the aging of the  
            population.  Health spending is projected to be 19.9% of gross  
            domestic product by 2022.  Per capita out of pocket spending  
            is projected to be $1,016 in 2014, rising to $1,341 in 2022.   
            Out of pocket spending is projected to make up 10.5% of the  
            $3.1 trillion in national health expenditures in 2014,  
            decreasing as a percentage of total expenditures to 9.1% by  

            In 2011, the Government Accountability Office (GAO) published  
            a report entitled "Health Care Price Transparency:  Meaningful  
            Price Information Is Difficult for Consumers to Obtain Prior  
            to Receiving Care."  The report found that several health care  
            and legal factors may make it difficult for consumers to  
            obtain price information for the health care services they  
            receive, particularly estimates of what their complete costs  
            will be.  The health care factors include the difficulty of  
            predicting health care services in advance, billing from  
            multiple providers, and the variety of insurance benefit  
            structures.  For example, when GAO contacted physicians'  
            offices to obtain information on the price of a diabetes  
            screening, several representatives said the patient needs to  
            be seen by a physician before the physician could determine  
            which screening tests the patient would need.  According to  
            provider association officials, consumers may have difficulty  
            obtaining complete cost estimates from providers because  
            providers have to know the status of insured consumers' cost  
            sharing under health benefit plans, such as how much consumers  
            have spent towards their deductible at any given time.

            Pricing transparency means different things to different  
            people.  A 2008 issue brief published by the National Quality  
            Forum (NQF) set out three different types of pricing  
            transparency, and their relevance for various parties in the  
            health care arena.  Consumers (patients and their families),  
            purchasers (employers and health plans), and providers  
            (physicians, hospitals, and other facilities) all are  
            potential audiences for price transparency, but relevant  
            information might be different for each audience.  Pricing  
            information might be retail prices (list prices for services  
            that are charged by providers to patients who are not covered  


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            by insurance or otherwise eligible for discounts); negotiated  
            prices (the price a provider agrees to charge for patients  
            covered by a specific health plan) and patient out-of-pocket  
            payments (i.e., coinsurance, deductibles, and exclusions - the  
            share of the health plan's negotiated price that a patient is  
            responsible for paying).  The NQF issue brief suggests this is  
            the price tag of most interest to patients and their families.  

           3)ALL-PAYER CLAIMS DATABASES  , or APCDs, are large-scale  
            databases that systematically collect medical claims, pharmacy  
            claims, dental claims (typically, but not always), and  
            eligibility and provider files from private and public payers.  
             In January 2014, the Robert Wood Johnson Foundation published  
            a pair of papers (one written by APCD Council, and one by  
            Freedman Healthcare) with the intent to guide states in  
            crafting all-payer claims database policies.  The papers lay  
            out various possible benefits of APCDs:  filling critical  
            information gaps for state agencies, supporting health care  
            and payment reform initiatives, and creating transparency for  
            consumers, purchasers, and state agencies.  APCDs have been  
            established in Maine, Kansas, Maryland, Massachusetts, New  
            Hampshire, Minnesota, Tennessee, Utah, and Vermont.  Most of  
            these states have chosen to house their APCDs at a state  
            agency (either an existing agency or a newly created entity);  
            one state (Colorado) has its APCD run by a nonprofit  
            organization.  The papers emphasize the importance of engaging  
            key stakeholders early and often, including payers, health  
            care providers, employers, state agencies, and consumers.  The  
            papers note that for most states, legislation creating an APCD  
            usually articulates broad reporting goals which are further  
            refined in rules or regulations for data collection or data  


             a)   OSHPD Hospital Chargemaster Program.  AB 1045 (Frommer),  
               Chapter 532, Statutes of 2005, and AB 1627 (Frommer),  
               Chapter 582, Statutes of 2003, (known as the Payers' Bill  
               of Rights) require all licensed general acute care  
               hospitals, psychiatric acute hospitals, and special  
               hospitals in California to make certain pricing information  
               available to the public and to submit this information  
               annually to the Office of Statewide Health Planning and  
               Development (OSHPD).  A hospital charge description master,  


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               also known as a chargemaster, is a file that contains the  
               prices of all services, goods, and procedures and is used  
               to generate a patient's bill.  The Payers' Bill of Rights  
               requires each hospital to submit a copy of its  
               chargemaster, a list of average charges for 25 common  
               outpatient procedures, and the estimated percentage change  
               in gross revenue due to price changes each July 1.  These  
               chargemaster files are posted on OSHPD's website.

             In 2007, the Congressional Research Service (CRS) issued a  
               report entitled "Does Price Transparency Improve Market  
               Efficiency? Implications of Empirical Evidence in Other  
               Markets for the Health Sector."  The report investigated  
               the question of whether better price information might  
               allow patients, either directly or through their  
               physicians, to obtain better value for health care services  
               and subsequently change their behavior.  The CRS report  
               examines pricing information released as a result of AB  
               1045 and AB 1627 and finds that California hospitals that  
               had increased average daily charges for normal vaginal  
               birth over the study period, on average, did not lose  
               patients.  Indeed, there was a slight positive correlation  
               between changes in normal vaginal birth charges and the  
               percentage change in discharges over the study period,  
               rather than the negative correlation that would be expected  
               if the availability of prices was influencing patient  
               behavior by making patients more price-sensitive.  

             The report notes that several explanations are possible for  
               this lack of a relationship between changes in average  
               charges and changes in hospital volume.  Differences in  
               perceived quality or care or amenity levels may matter more  
               than price for many patients, especially if insurance  
               coverage insulates them from prices (insurers and patients  
               paid hospitals about 38% of the "sticker price" charges  
               found in chargemasters in 2004).  Alternatively, patients  
               may care about prices, but might be unable, unwilling, or  
               disinclined to examine online price data, which is not  
               presented in a user friendly way: for each hospital, data  
               is typically available in the form of a spreadsheet that  
               lists the prices for thousands of procedures.  Moreover,  
               the chargemasters are currently not required to be provided  
               in a standardized format, making it impossible to generate  
               an aggregate statewide chargemaster that could serve as a  
               baseline for comparison.  Finally, the report posits that  


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               changes in prices might correlate to offsetting changes in  
               quality or amenity levels.  Nonetheless, the report  
               concludes that this preliminary evidence suggests that the  
               California price transparency initiative so far has had  
               little observable effect where it might have been expected  
               to have the greatest effect.  

             b)   California Healthcare Performance Initiative (CHPI).   
               CHPI claims to be building the most robust healthcare  
               database in the State of California.  It combines data on  
               the healthcare experiences of more than 12 million people  
               from health plans and Medicare to evaluate the quality and  
               efficiency of medical services.  CHPI's current activities  
               build upon six years of performance measurement conducted  
               through the California Physician Performance Initiative  

             CHPI claims to administer the only Multi-Payer Claims  
               Database currently in operation in California, which  
               consists of claims voluntarily reported by Anthem Blue  
               Cross, Blue Shield of California, United Healthcare, and  
               the Medicare fee-for-service program.  These data provide  
               information on services provided by hospitals, emergency  
               departments, ambulatory surgery centers, ancillary  
               providers, pharmacies, and physicians.  CHPI was designated  
               as a qualified entity (QE) in the Medicare data sharing  
               program in February 2013.  The QE certification program was  
               created under the ACA to allow public reporting of  
               physician-level quality measurements based on Medicare  
               claims data combined with other payers' data.  States and  
               data organizations may apply for QE certification, which is  
               the only avenue for public reporting of Medicare quality  
               data at the provider level.  CHPI indicates it has received  
               Medicare fee-for-service claims representing over 5 million  
               California beneficiaries, and is in the process of  
               integrating these claims with its private health plan  
               claims data.

             According to a September 13, 2010 California Healthline  
               article, the California Medical Association (CMA) filed a  
               class-action lawsuit in 2010 claiming that Blue Shield of  
               California created an online physician rating program that  
               could harm doctors and their patients by promoting  
               inaccurate information.  The article states that Blue  
               Shield worked with the Pacific Business Group on Health to  


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               evaluate the doctors using data collected by the CPPI,  
               which is CHPI's predecessor.  The CMA sought a court order  
               to stop the program and inform state residents about  
               problems with the data.  The case was dismissed by an  
               Alameda County court.

             c)   CDI grant.  The ACA has made available $250 million  
               through the Health Insurance Premium Review Grants Program  
                                      over five years to fund states' review of proposed health  
               insurance premium increases.  As part of the grant program,  
               the ACA also provides funding to establish data centers to  
               enhance health pricing transparency.  These data centers  
               are designed to allow consumers and businesses to better  
               understand the comparative price of procedures in a given  
               region or for a specific hospital, insurer, or provider.   
               This data can then be used to drive decision-making,  
               ideally rewarding cost-effective provision of care.  In  
               addition, medical claims data can be used to better  
               understand cost drivers, evaluate quality improvement  
               initiatives, and better understand utilization of services.

               In September 2013, CDI received a grant under this program  
               for $5.2 million.  Under the terms of the grant, CDI will  
               use these funds to contract with an academic institution or  
               other nonprofit organization to establish a database of  
               medical claims data.  The dataset will incorporate claims  
               data from private issuers, public payers, and potentially,  
               self-funded plans.  In June 2014, CDI announced an  
               agreement with the University of California, San Francisco  
               (UCSF) to collect and analyze the data and make the  
               information available online.  In the initial stage of the  
               project, UCSF's analysis will provide average prices for  
               geographic regions within the state using a number of data  
               sources, including private commercial health insurance and  
               public health programs such as Medicare.  

               According to the author of this bill, the CDI-led project  
               will use existing data that is publicly available, whereas  
               this bill is contemplating a broader, more comprehensive  
               database that includes plans, insurers, and provider data,  
               as well as considering fee-for-service and capitated  
               sources.  The author's office indicates the data used by  
               the CDI-led project will complement the CQDB.  

           5)SUPPORT  .  The California Association of Physician Groups  


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            (CAPG), in support, writes that an APCD can provide  
            transparency for payers and the public on cost and quality of  
            health care services if it is universally applied across all  
            provider types, all product types, and all payer sources.   
            CAPG further argues, because 41% of provider payments in  
            California are capitated, it will be very difficult to  
            implement an effective APCD without first deploying technology  
            that allows the entire market to be captured in one data pool.  
             CAPG recommends further amending this bill to specifically  
            require CQDB to solve this problem.

           6)CONCERNS  .  The California Department of Insurance (CDI) has a  
            number of concerns with this bill.  CDI argues that this  
            bill's goals closely align with CDI's goals under its  
            transparency project currently being implemented by UCSF with  
            the aid of federal grant funding.  CDI is concerned, however,  
            that this bill would create needless inefficiencies and  
            barriers to sustainability.  First, by limiting eligibility  
            for CQDB contracts to private nonprofit organizations, this  
            bill would exclude UC, which is currently working in this  
            area.  Second, because this bill prohibits the database from  
            receiving funding from other sources to accomplish the  
            purposes of this bill, precluding the use of existing federal  
            grants to support the database's activities.  CDI is also  
            concerned about restricting the use of data for any purpose  
            other than what is specified in this bill, which could  
            preclude the database from serving as a public resource.   
            Finally, CDI identifies language that it believes could  
            exclude hospitals from the information the database publishes  

           7)RELATED LEGISLATION  .  

             a)   SB 746 (Leno) of 2013 would have established new data  
               reporting requirements on all health plans applicable to  
               products sold in the large group market and established new  
               specific data reporting requirements related to annual  
               medical trend factors by service category, as well as  
               claims data or de-identified patient-level data, as  
               specified, for a health plan that exclusively contracts  
               with no more than two medical groups in the state to  
               provide or arrange for professional medical services for  
               the enrollees of the plan (referring to Kaiser Permanente).  
                SB 746 was vetoed by the Governor, who urged all parties  
               to work together in the effort to make health care costs  


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               more transparent.

             b)   SB 1182 (Leno) requires health plans and insurers to  
               submit to regulators for rate review any large group plan  
               contract or policy rate increases that exceed 5% of the  
               prior year's rate and establishes new data reporting  
               requirements for products sold in the large group market.   
               SB 1182 is pending in this Committee.

             c)   SB 1340 (Ed Hernandez) expands provisions related to gag  
               clauses in contracts between health plans or insurers and  
               providers.  SB 1340 is pending on the Assembly Floor.

             d)   AB 1558 (Roger Hernández) creates the California Health  
               Data Organization within the University of California to  
               organize data provided by health plans and insurers on a  
               website to allow consumers to compare the prices paid for  
               procedures, as specified.  AB 1558 is pending in the Senate  
               Health Committee.

           8)PREVIOUS LEGISLATION  .  

             a)   SB 751 (Gaines and Ed Hernandez), Chapter 244, Statutes  
               of 2011, prohibits contracts between carriers and hospitals  
               from containing any provision that restricts the ability of  
               the carrier from furnishing information to enrollees or  
               insureds concerning cost range of procedures or the quality  
               of services.  

             b)   AB 2389 (Gaines) of 2009 would have prohibited a  
               contract between a health facility and a carrier from  
               containing a provision that restricts the ability of the  
               carrier to furnish information on the cost of procedures or  
               health care quality information to carrier enrollees.  AB  
               2389 died in the Assembly on Concurrence.

             c)   AB 2967 (Lieber) of 2008 would have established a Health  
               Care Cost and Quality Transparency Committee to develop and  
               recommend to the CHHSA Secretary a health care cost and  
               quality transparency plan, and would have made the  
               Secretary responsible for the timely implementation of the  
               transparency plan.  AB 2967 died on the Senate Inactive  

             d)   SB 1300 (Corbett) of 2008 would have prohibited a  


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               contract between a health care provider and a health plan  
               from containing a provision that restricts the ability of  
               the health plan to furnish information on the cost of  
               procedures or health care quality information to plan  
               enrollees.  SB 1300 died on the Senate Floor.

             e)   AB 1296 (Torrico), Chapter 698, Statutes of 2007,  
               requires a health plan or contractor offering health  
               benefits to California Public Employees' Retirement System  
               (CalPERS) members and annuitants to disclose to CalPERS the  
               cost, utilization, actual claim payments, and contract  
               allowance amounts for health care services rendered by  
               participating hospitals to each member and annuitant.  

             f)   AB 1 X1 (Nuñez) of 2007, among many other provisions  
               relating to health care reform, contained nearly identical  
               language as that contained in AB 2967.  AB1 X1 failed  
               passage in the Senate Health Committee.

           9)POLICY COMMENTS  .  This bill requires health plans and  
            insurers, including self-insured employers and multiemployer  
            self-insured plans; suppliers; and providers to provide  
            utilization data and pricing information to the CQDB.  While  
            health plans and insurers have access to claims and other data  
            that would allow them to share this information with CQDB, it  
            is not clear that providers and suppliers have this data.   
            Therefore, the Committee may wish to consider amending this  
            bill to clarify what data providers and suppliers are required  
            to report to CQDB.  

          California Association of Physician Groups
          Kaiser Permanente
          None on file.

           Analysis Prepared by  :    Ben Russell / HEALTH / (916) 319-2097 


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