BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    SB 1159


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          Date of Hearing:   June 28, 2016


                ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION


                                   Ed Chau, Chair


          SB  
          1159 (Hernandez) - As Amended May 31, 2016


          SENATE VOTE:  25-12


          SUBJECT:  California Health Care Cost and Quality Database


          SUMMARY:  Requires certain health care entities to provide  
          medical claims, cost, and quality information to the Secretary  
          of California Health and Human Services Agency (CHHSA) for the  
          purpose of developing information for inclusion in a health care  
          cost and quality database, and further requires all data  
          disclosures to comply with applicable state and federal laws for  
          the protection of the privacy and security of data, and  
          prohibits the public disclosure of any unaggregated,  
          individually identifiable health information.   Specifically,  
          this bill:  



          1)Establishes the California Health Care Cost and Quality  
            Database.

          2)Requires health care service plans, health insurers,  
            suppliers, providers, and self-insured employers and plans, as  
            defined, (health plans) to provide to CHHSA for the sole  
            purpose of creating a health care cost and quality database,  








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            all of the following:



             a)   Utilization data from health plan and health insurers'  
               medical, dental, and pharmacy claims, or (for entities that  
               do not use claims data) encounter data consistent with the  
               core set of data elements for data submission proposed by  
               the All-Payer Claims Database Council (APCD Council), the  
               University of New Hampshire, and the National Association  
               of Health Data Organizations; 

             b)   Pricing information for health care items, services, and  
               medical and surgical episodes of care gathered from allowed  
               charges for covered health care items and services, or (for  
               entities that do not produce individual claims) price  
               information that is the best possible proxy to pricing  
               information for health care items, services, and medical  
               and surgical episodes of care available to allow for  
               meaningful comparisons of provider prices and treatment  
               costs; and



             c)   Information sufficient to determine the impacts of  
               social determinants of health, including age, gender, race,  
               ethnicity, limited English proficiency, sexual orientation  
               and gender identity, ZIP Code, and any other factors for  
               which there is peer-reviewed evidence.  



          3)Permits CHHSA to report an entity's failure to comply with  
            these provisions to the entity's regulating agency, authorizes  
            the regulating agency to enforce these provisions using  
            existing enforcement procedures, requires moneys collected  
            from enforcement to be subject to appropriation by the  
            Legislature, and specifies that failure to comply with these  
            provisions is not a crime. 








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          4)Requires all uses and disclosures of data pursuant to this  
            bill to comply with all applicable state and federal laws for  
            the protection of the privacy and security of data, including,  
            but not limited to, the Confidentiality of Medical Information  
            Act (CMIA), the Information Practices Act of 1977 (IPA), the  
            federal Health Insurance Portability and Accountability Act of  
            1996 (HIPAA), the federal Health Information Technology for  
            Economic and Clinical Health Act, and all implementing  
            regulations.  



          5)Requires all policies and protocols developed for this bill to  
            ensure that the privacy, security, and confidentiality of  
            individually identifiable health information are protected.  



          6)Prohibits CHHSA from publicly disclosing any unaggregated,  
            individually identifiable health information, and requires  
            CHHSA to develop a protocol for assessing the risk of  
            reidentification stemming from public disclosure of any health  
            information that is aggregated.



          7)Defines individually identifiable health information  
            consistent with federal law. 


           
          8)Protects from public disclosure any confidentially negotiated  
            contract terms contained in a contract between a health plan  
            or health insurer and a provider or supplier.  












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          9)Prohibits disclosure in an unaggregated format of individually  
            identifiable proprietary contract information included in a  
            contract between a health plan or health insurer and a  
            provider or supplier.

          10)Authorizes CHHSA to enter into contracts or agreements to  
            share the information collected in this bill so long as the  
            use of that information complies with the requirements of this  
            bill.


            
          11)Requires CHHSA to convene an advisory committee, composed as  
            specified, to identify the type of data, purpose of use, and  
            entities and individuals that are required to report to, or  
            may have access to, a health care cost and quality database.  





          12)Requires the advisory committee to hold public meetings,  
            subject to the Bagley-Keene Open Meeting Act, with  
            stakeholders, solicit input, and set its own meeting agendas.   
            .  

          13)Requires CHHSA to submit a report to the Legislature and the  
            Governor on or before January 1, 2019, based on the advisory  
            committee's findings, including input from public meetings,  
            and requires the report to address, at a minimum, the  
            following topics:



             a)   Assessing California health care needs and available  
               resources;
             b)   Containing the cost of health care services and  
               coverage;








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             c)   Improving the quality and medical appropriateness of  
               health care;


             d)   Reducing health disparities and addressing the social  
               determinants of health;


             e)   Increasing the transparency of health care costs and the  
               relative efficiency with which care is delivered; 


             f)   Use of disease management, wellness, prevention, and  
               other innovative programs to keep people healthy, reduce  
               disparities and costs, and improve health outcomes for all  
               populations;


             g)   Efficient utilization of prescription drugs and  
               technology; 


             h)   Reducing unnecessary, inappropriate, and wasteful health  
               care; and,


             i)   Educating consumers in the use of health care  
               information.  



          14)Repeals the bill's reporting requirement on July 1, 2022.

          15)Prohibits advisory committee members from receiving per diem  
            or travel expense reimbursement, or any other expense  
            reimbursement.  









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          16)Makes findings and declarations that the public's right of  
            access to  meetings or writings of public bodies, officials,  
            or agencies  must be limited because certain information must  
            remain confidential in order to protect confidential and  
            proprietary information submitted to CHHSA.  



          17)States that the intent of the bill is to make cost and  
            quality data available and encourage health care service  
            plans, health insurers, and providers to develop innovative  
            approaches, services, and programs that are cost effective and  
            responsive, recognizing the diversity of California and the  
            impact of social determinants of health.



          EXISTING LAW:  



          1)Establishes the Office of Statewide Health Planning and  
            Development (OSHPD) as the single state agency responsible for  
            collecting specified health facility and clinic data for use  
            by all agencies; requires hospitals to make and file with  
            OSHPD certain specified reports, including a Hospital  
            Discharge Abstract Data Record with data elements for each  
            admission, such as diagnoses and disposition of the patient;  
            and requires OSHPD to publish annually risk-adjusted outcome  
            reports on medical, surgical and obstetric conditions or  
            procedures, and others selected by OSHPD in accordance with  
            specified criteria.  (Welfare and Institutions Code (WIC)  
            Section 16906 et seq.)

          2)Establishes the Department of Managed Health Care (DMHC) to  
            regulate health plans and the California Department of  
            Insurance (CDI) to regulate health insurers.  Requires  








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            specified health plans and health insurers to submit reports  
            to state and federal regulators on medical loss ratios, rate  
            filings, enrollment data, as specified.  (Health and Safety  
            Code Section 1341 et seq.  and Insurance Code Section 12900 et  
            seq.)

          3)Establishes the federal Patient Protection and Affordable Care  
            Act (ACA), which includes comprehensive health care insurance  
            reforms that aim to increase access to health care, improve  
            quality and lower health care costs, and provide new consumer  
            protections. (42 U.S.C. Section 18001 et seq.) 


          4)Establishes 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.  (Public Law 104-191)

          5)Establishes the CMIA, which prohibits providers of healthcare,  
            health care service plans, their contractors, and any business  
            organized for the purpose of maintaining medical information,  
            from using medical 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.   
            (Civil Code 56 et seq.)

          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee:


          1)Likely ongoing costs in the hundreds of thousands per year to  
            provide staff support to the required advisory committee and  
            to develop the report on health care utilization and financing  
            issues (General Fund).



          2)Ongoing costs of about $100,000 per year for CDI enforcement  








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            of the requirement to report data by insurers (Insurance  
            Fund).

          3)Likely ongoing costs up $100,000 per year for DMHC enforcement  
            of the requirement to report data by health plans (Managed  
            Care Fund).





          COMMENTS:


           1)Purpose of this bill  .  This bill seeks to put health care  
            provider cost and performance information into a statewide  
            database, so that it can be analyzed by the state and by  
            academic researchers for the purpose of determining areas  
            where health care costs and the quality of services can be  
            improved in California.  This bill is author-sponsored.

           2)Author's statement  .  According to the author, "In 2014 and  
            2015, the Senate Committee on Health convened several health  
            care experts to discuss factors that contribute to the growing  
            cost of health care in California and efforts to make care  
            more affordable. At a second hearing in February of this year,  
            the Committee heard testimony related to some major cost  
            drivers in the health care system, including pharmaceuticals,  
            hospital costs, and the effects of geographic location on  
            contracting. The third in the series served to educate members  
            and the public about the effect of health care costs on  
            consumers. 

          "This series of hearings 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 hearings illustrated the  
            complexity of the health care market and the array of  
            approaches to containing costs.  In addition to expanded  








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            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.  

          "[T]his 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 them."

           3)Creating a new comprehensive statewide health care cost and  
            service database  .  The California Healthcare Performance  
            Information System (CHPI) is a voluntary physician performance  
            database with statistical analyses that will eventually  
            publish information online.  According to the CHPI Website,  
            starting in 2015, output will be an analysis of claims data  
            aggregated from more than 12 million patients enrolled in  
            CHPI's three participating California health plans: Blue  
            Shield, Anthem Blue Cross, and United Healthcare, and Medicare  
            fee-for-service.  CHPI was federally certified to include data  
            from Medicare's five million California beneficiaries, and  
            became the first qualified entity to receive Medicare data. 

          In 2014, CDI announced an agreement with the University of  
            California, San Francisco (UCSF) to provide meaningful  
            information to consumers about healthcare prices and quality.   
            The health care pricing and quality transparency project is  
            funded by a federal Cycle III Rate Review Grant from the HHS  
            that was awarded to CDI as part of an initiative under the  
            ACA.  Under the agreement with the CDI, researchers at the  
            Philip R. Lee Institute for Health Policy Studies at UCSF will  
            collect and analyze data to develop price and quality  
            information for a number of common medical procedures and  








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            episodes of care.  The information will be made available  
            online.  According to CDI, it reports average prices paid for  
            episodes of care or annual costs for chronic conditions, as  
            well as quality measures where available.  Prices will be  
            aggregated across payers and providers, and shown at the  
            regional level based on the 19 California rating regions (some  
            regions may need to be consolidated pursuant to the terms of  
            the data license agreement).  CDI's website is expected to  
            provide price information for 95 to 99 episodes of care or  
            conditions.  Five to 15 of those episodes or conditions will  
            have both price and quality information as well as consumer  
            education content created by Consumers Union.  Quality  
            information will consist of existing performance,  
            appropriateness, and outcome measures.

          The Regional Cost and Quality Atlas is an interactive website to  
            be released in Summer 2016 that will compare aggregated cost  
            and quality data, by payer/product type (not individual  
            payers), for each of 19 regions (the same regions that had  
            been defined for Covered California).  The project is a  
            partnership between the Integrated Healthcare Association  
            (IHA), the California HealthCare Foundation, and CHHSA.   
            Working with large physician organizations and health plans,  
            IHA developed a methodology for calculating risk-adjusted  
            Total Cost of Care to be used as part of the Pay for  
            Performance program.   Health plans submit detailed data files  
            including claims and enrollment data to Truven Health Systems  
            (Truven).  Truven uses this detail to calculate actual  
            payments to physician organizations for a set of enrollees  
            divided by number of enrollees.  Payments include professional  
            services, pharmacy, hospital care, ancillary services, as well  
            as payments made by consumers to cover cost-sharing amounts.

            The author contends that this bill is needed - despite these  
            existing projects on physician performance and health care  
            prices and quality - in order to comprehensively study health  
            care price and performance information and find ways to  
            promote care that is safe, medically effective,  
            patient-centered, timely, efficient, affordable, and  








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            equitable.

           4)Privacy law and privacy concerns  .  California's  
            Confidentiality of Medical Information Act (CMIA) generally  
            restricts the sharing or disclosure of a person's medical  
            information without first obtaining their written consent.   
            The act states that "a provider of health care, health care  
            service plan, or contractor shall not disclose medical  
            information regarding a patient of the provider of health care  
            or an enrollee or subscriber of a health care service plan  
            without first obtaining an authorization," unless a particular  
            exception allows the disclosure.  HIPAA contains similar  
            provisions requiring patient consent before patient  
            information is shared, with certain exceptions.
             
             Included in the exceptions for which no prior authorization is  
            required are when disclosure is "otherwise specifically  
            required by law," and when information is disclosed "to public  
            agencies, clinical investigators, health care research  
            organizations, and accredited public or private nonprofit  
            educational or health care institutions for bona fide research  
            purposes" as long as the identity of a patient is not further  
            disclosed.

            This bill states that all "applicable" privacy and data  
            security laws, including the IPA, CMIA and HIPAA, would govern  
            all uses and disclosures of data made under this bill. But as  
            currently drafted, CMIA and HIPAA would in fact not apply to  
            disclosures of data from the database to be created under this  
            bill, because state agencies are not "covered entities" under  
            the CMIA or HIPAA.   


            State agencies are, however, subject to the IPA, which places  
            some limits on the disclosure of personal information held by  
            governmental agencies in order to protect the privacy of  
            affected individuals.  In general, the Information Practices  
            Act prohibits the disclosure of personal information to  
            another party without first obtaining the permission of the  








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            affected individual.  While state agencies have a duty to  
            protect the confidentiality of that information, the  
            protections under IPA are not as strong as those under the  
            CMIA and HIPAA.  For example, in certain circumstances,  
            disclosure may be authorized without permission from the  
            affected individual, when the information may be necessary for  
            an agency "to perform its constitutional or statutory duties."  
             (Civil Code Sec. 1798.24.)  


            For this reason, the ACLU and Consumer Federation have  
            proposed a number of amendments to ensure that the same  
            confidentiality rules in CMIA and HIPAA would apply to the  
            release of data from the health care cost and quality database  
            to be created under this bill and to ensure the data is  
            secure.


           5)Author's amendments  .  The following are several amendments  
            negotiated and agreed to between the Committee, the author and  
            stakeholders involved in the bill.  Given the approaching  
            legislative deadline, the author has agreed to accept these  
            amendments as author's amendments in Committee, and with these  
            amendments the organizations that had prior concerns with the  
            bill are now neutral on the bill.  The amendments ensure that  
            CHHSA follows CMIA and HIPAA privacy requirements, in addition  
            to IPA privacy requirements, when releasing data from the  
            database and also ensure that the data in the database is  
            encrypted for security purposes:


            On page 3, between lines 32 and 33 insert:


            "consistent with Civil Code Section 56.10(b)(9)"
            On page 4, between lines 7 and 8 insert:  


            "All-Payer Claims Database"








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            On page 4, line 31, strike "All" and insert:  


            "(A) Subject to Civil Code Section 56.10(b)(9), all"
            On page 5, strike lines 5 through 12, inclusive, and insert:


            "(B) Use and disclosure of data pursuant to this section shall  
            be consistent with privacy and security protections for  
            individually identifiable health information and medical  
            information  under state and federal law, including any  
            applicable exceptions to the requirement to obtain patient  
            authorization, including but not limited to, Civil Code  
            Section 56.10(b)(9) and 56.10(c)(7).
            (2)(A) All policies and protocols developed pursuant to this  
            section shall ensure that the privacy, security, and  
            confidentiality of individually identifiable health  
            information and medical information is protected.  The  
            secretary shall not disclose any unaggregated, individually  
            identifiable health information or medical information and  
            shall develop a protocol for assessing the risk of  
            reidentification stemming from disclosure of any health  
            information and medical information that is aggregated,  
            individually identifiable health information or medical  
            information.  This paragraph does not preclude sharing  
            unaggregated, individually identifiable health information  
            with researchers for research purposes, consistent with Civil  
            Code Section 56.10(c)(7).


            On page 5, between lines 15 and 16 insert: 


            "Medical information" has the same meaning as in Section  
                                           56.05(j) of the Confidentiality of Medical Information Act  
            (Part 302.6, commencing with Section 56, of Division 1 of the  
            Civil Code).
            On page 5, between lines 26 and 27 insert:









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            "(d) (1) The agency administering the California Health Care  
            Cost and Quality Database shall adopt rigorous standards of  
            security protection to ensure as nearly as possible that the  
            information contained in and collected for the purposes of the  
            California Health Care Cost and Quality Database is not  
            compromised.  This shall include, but is not limited to,  
            encryption.


            (2) For purposes of this section, the term encryption (A)  
            means the protection of data in electronic form, in storage or  
            in transit, using an encryption technology that has been  
            generally accepted by experts in the field of information  
            security that renders such data indecipherable in the absence  
            of associated cryptographic keys necessary to enable  
            decryption of such data; and (B) includes appropriate  
            management and safeguards of such cryptographic keys so as to  
            protect the integrity of the encryption.


            (e) For the purposes of this section, the California Health  
            and Human Services Agency shall be considered any agency  
            subject to the provisions of Chapter 1 (commencing with  
            Section 1798) of Title 1.8 of Part 4 of Division 3 of the  
            Civil Code."



           6)Arguments in support  .  Health Access California states that a  
            cost and quality database, with the addition of data on the  
            social determinants of health, "could improve transparency and  
            allow policymakers, purchasers, and others to pursue the  
            quadruple aim of lower health care costs, improved health  
            outcomes, improved health system, and improved health equity.   
            The Western Center on Law and Poverty requests that this bill  
            include cost information in negotiated contracts between  
            health plans and providers."  









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           7)Double referral  .  This bill passed the Assembly Health  
            Committee on a 14-3 vote on June 21, 2016.  


           8)Prior legislation  .   SB 26 (Hernandez) of 2015 would have  
            required the CHHSA Secretary to, no later than January 1,  
            2017, use a competitive process to contract, as specified,  
            with one or more independent, nonprofit organizations in order  
            to administer the California Health Care Cost and Quality  
            Database.  It would have required the nonprofit organization,  
            no later than January 1, 2019, to make a publicly available,  
            Web-based, searchable database, as specified.  The bill would  
            also have required the information and analysis included in  
            the database to be presented in a way that facilitates  
            comparisons of cost, quality, and patient satisfaction across  
            payers, provider organizations, and other suppliers of health  
            care services. SB 1322 was held on the Senate Appropriations  
            Committee suspense file.



            SB 1182 (Leno), Chapter 577, Statutes of 2014, requires health  
            plans and insurers to share specified data with purchasers  
            that have 1,000 or more enrollees or that are multiemployer  
            trusts.



            SB 1340 (Hernandez), Chapter 83, Statutes of 2014, expands  
            provisions related to gag clauses in contracts between health  
            plans or insurers and providers.  



            AB 1558 (Roger Hernández) of 2014, would have created 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  








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            paid for procedures, as specified.  AB 1558 was held on the  
            Senate Appropriations Committee suspense file.





            SB 1322 (Hernandez) of 2014, was substantially similar to SB  
            26.  SB 1322 was held on the Assembly Appropriations Committee  
            suspense file.



            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 more transparent.



            SB 1196 (Hernandez), Chapter 869, Statutes of 2011, prohibits  
            a contract between a health plan insurer and a provider or  
            supplier, from prohibiting, conditioning, or in any way  
            restricting the disclosure of claims data related to health  
            care services provided to an enrollee or subscriber of the  
            health plan or carrier, or beneficiaries of any self-funded  
            health coverage arrangement administered by the carrier to a  
            qualified entity, as defined.











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



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



            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 CHHSA  
            Secretary responsible for the timely implementation of the  
            transparency plan.  AB 2967 died on the Senate Inactive File.



            SB 1300 (Corbett) of 2008, would have prohibited a 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.



            AB 1296 (Torrico), Chapter 698 Statutes of 2007, requires a  
            health plan or contractor offering health benefits to  
            California Public Employees' Retirement System (CalPERS)  








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            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.  



            ABX1 1 (Nuñez) of 2007, among many other provisions relating  
            to health care reform, contained nearly identical language as  
            that contained in AB 2967.  ABX1 1 failed passage in the  
            Senate Health Committee.



          REGISTERED SUPPORT / OPPOSITION:




          Support


          AARP


          CAPG The Voice of Accountable Physician Groups


          Consumers Union


          California Pan Ethnic Health Network (CPEHN)


          Health Access


          SEIU









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          Western Center on Law and Poverty




          Opposition


          None on file.




          Analysis Prepared by:Jennie Bretschneider / P. & C.P. / (916)  
          319-2200