South Carolina General Assembly
116th Session, 2005-2006

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Bill 305

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Indicates New Matter


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Indicates Matter Stricken

Indicates New Matter

COMMITTEE AMENDMENT ADOPTED

March 10, 2005

S. 305

Introduced by Senators Peeler, J. Verne Smith, Short, Alexander, Hayes, Moore and Lourie

S. Printed 3/10/05--S.    [SEC 3/10/05 4:56 PM]

Read the first time January 20, 2005.

            

A BILL

TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, TO ENACT THE "SOUTH CAROLINA MEDICAID MODERNIZATION ACT" INCLUDING PROVISIONS TO ADD ARTICLE 8, CHAPTER 6, TITLE 44 SO AS TO PROVIDE THAT THE DEPARTMENT OF HEALTH AND HUMAN SERVICES SHALL IMPLEMENT EFFECTIVE AND EFFICIENT MEDICAID CARE MANAGEMENT, INCLUDING ADMINISTERING CARE MANAGEMENT PROGRAMS FOR ROUTINE CARE AND IMPLEMENTING CARE MANAGEMENT PROGRAMS FOR CHRONIC DISEASE CARE; TO PROVIDE FOR EFFECTIVE MEDICAID PHARMACY BENEFIT MANAGEMENT, INCLUDING THE ESTABLISHMENT OF THE PHARMACY AND THERAPEUTICS COMMITTEE, WHICH SHALL RECOMMEND CLASSES OF DRUGS THAT SHOULD BE INCLUDED ON A PREFERRED DRUG LIST AND CRITERIA FOR IMPLEMENTATION OF A PREFERRED DRUG LIST PROGRAM; TO PROVIDE FOR EFFECTIVE MEDICAID STATE AGENCY SERVICE MANAGEMENT, INCLUDING PERIODIC MEETINGS OF DIRECTORS OF ALL STATE AGENCIES RECEIVING MEDICAID FUNDS FOR THE PURPOSE OF CONTROLLING THE GROWTH OF MEDICAID AND IMPROVING THE STATE MEDICAID PROGRAM AND TO REQUIRE THE DEPARTMENT TO REPORT TO THE GENERAL ASSEMBLY ON MEDICAID EXPENDITURES AND TO CONDUCT PERIODIC AUDITS AND REVIEWS OF STATE AGENCIES RECEIVING MEDICAID FUNDS; TO ADD SECTION 44-6-110 SO AS TO REQUIRE THE DEPARTMENT OF HEALTH AND HUMAN SERVICES TO, AMONG OTHER THINGS, DEVELOP MEDICAID ELIGIBILITY DETERMINATION CRITERIA, TO CENTRALIZE MEDICAID ELIGIBILITY PROCESSING, AND TO CONDUCT AUDITS OF ELIGIBILITY FILES; TO AMEND SECTION 44-6-80, RELATING TO REPORTS TO THE GENERAL ASSEMBLY, SO AS TO FURTHER SPECIFY THE CONTENTS AND REQUIREMENTS FOR THESE REPORTS; TO AMEND ARTICLE 3, CHAPTER 6, TITLE 44, RELATING TO CHILD DEVELOPMENT SERVICES, SO AS TO DELETE THESE PROVISIONS AND TO PROVIDE FOR MEDICAID FRAUD AND ABUSE MANAGEMENT, INCLUDING PROVISIONS REQUIRING AUDITS, SANCTIONS, AND CONTRACTING WITH OTHER ENTITIES TO PREVENT MEDICAID FRAUD, ABUSE, AND WASTE; TO ADD SECTION 38-71-270 SO AS TO REQUIRE HEALTH INSURERS TO SUBMIT NAMES AND OTHER IDENTIFYING INFORMATION TO THE DEPARTMENT OF INSURANCE TO BE PROVIDED TO THE DEPARTMENT OF HEALTH AND HUMAN SERVICES TO USE IN IDENTIFYING MEDICAID RECIPIENTS WHO HAVE OTHER HEALTH INSURANCE COVERAGE; TO ADD SECTION 44-6-112 SO AS TO AUTHORIZE THE DEPARTMENT OF HEALTH AND HUMAN SERVICES TO FUND THE NET COSTS OF ANY THIRD PARTY LIABILITY AND DRUG REBATE COLLECTION EFFORTS FROM THE REVENUE COLLECTED IN THOSE EFFORTS; TO AMEND SECTION 43-3-65, RELATING TO COUNTIES PROVIDING OFFICE SPACE TO THE DEPARTMENT OF SOCIAL SERVICES, SO AS TO ALSO REQUIRE COUNTIES TO PROVIDE SPACE FOR THE DEPARTMENT OF HEALTH AND HUMAN SERVICES ELIGIBILITY PROCESSING; AND TO REPEAL JOINT RESOLUTION 370 OF 2002 RELATING TO NURSING HOME BED FRANCHISE FEES.

Amend Title To Conform

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1.    This act may be cited as the "South Carolina Medicaid Modernization Act".

SECTION 2. Chapter 6, Title 44 of the 1976 Code is amended by adding Article 8:

"Article 8

Medicaid Management

Subarticle 1

Effective Medicaid Care Management

Section 44-6-1110.    The department shall administer the Medicaid program in an effective and efficient manner that provides the best healthcare value for South Carolinians.

Section 44-6-1120.    (A)    The department shall implement care management programs for recipients with chronic diseases and other conditions that exert unusually high demand on the Medicaid health care system. These programs should include the following elements:

(1)    predictive indicators through utilization review;

(2)    specific treatment protocols and appropriate care coordination procedures;

(3)    improved access to medical homes and primary care providers;

(4)    alternatives to emergency room care;

(5)    educational opportunities concerning disease states and treatment options;

(6)    prevention measures; and

(7)    opportunities for self-directed healthcare and increased involvement of recipients in their own healthcare decisions.

(B)    In the development and administration of care management programs, the department is authorized to enter into contracts, implement reimbursement incentives, establish appropriate methods of enrollment, including automatic assignment, and apply for necessary waivers or other federal approvals.

(C)    The department annually shall evaluate and report on the effectiveness of care management programs. The evaluation must include, but is not limited to, impacts on service utilization, cost trends, access to care, quality indicators, and recipient satisfaction.

Subarticle 2

Effective Medicaid Pharmacy Benefit Management

Section 44-6-1210.    The department shall implement pharmacy benefit management programs that ensure appropriate access to clinically-effective pharmaceuticals. For purposes of this article:

(1)    'Chairman' means Chairman of the Pharmacy and Therapeutics Committee.

(2)    'Committee' means the Pharmacy and Therapeutics Committee.

(3)    'Department' means the Department of Health and Human Services.

(4)    'Director' means the Director of the Department of Health and Human Services.

Section 44-6-1220.    (A)    There is established within the Department the Pharmacy and Therapeutics Committee. The committee must consist of fifteen members appointed by the director and serving at the pleasure of the director. The members must include eleven physicians and four pharmacists licensed to practice in this State and actively engaged in providing services to the South Carolina Medicaid population. The physicians may include, but are not limited to, doctors who have experience in treating diabetes, cancer, HIV/AIDS, mental illness, and hemophilia and who practice in internal medicine, primary care, and pediatrics.

(B)    The committee shall adopt by-laws that include, but are not limited to, membership terms. A chairman and vice-chairman must be elected on an annual basis from among the committee membership. Committee members may not be compensated for service on the committee but may be reimbursed for actual and necessary expenses incurred pursuant to discharging committee duties in an amount not to exceed the mileage and subsistence amounts allowed by law for members of boards, commissions, and committees.

(C)    The committee shall meet at least quarterly and may meet at other times at the discretion of the chairman or the director. Committee meetings are subject to the provisions of the Freedom of Information Act. The department shall publish notice of regular business meetings of the committee at least thirty days before such meeting. The director or chairman may call special meetings of the committee and provide public notice as may be practical.

(D)    The committee shall provide for public comment, including comment on clinical and patient care data from Medicaid providers, representatives of the pharmaceutical industry, and patient advocacy groups. Trade secrets as defined in state and relevant federal law must not be publicly disclosed.

(E)    The committee shall recommend to the department therapeutic classes of drugs that should be included on a preferred drug list. For those recommended classes, the committee must recommend the drug or drugs considered preferred within that class based on safety and efficacy. In determining safety and efficacy, the committee may consider all submitted public comment or clinical information including, but not limited to, scientific evidence, standards of practice, peer-reviewed medical literature, randomized clinical trials, pharmacoeconomic studies, and outcomes research data. The committee also shall recommend prior authorization criteria for non-preferred drugs in the recommended therapeutic classes.

Section 44-6-1230.    Any preferred drug list program implemented by the department must include:

(1)    procedures to ensure that a request for prior authorization that has no material defect or impropriety can be processed within twenty-four hours of receipt;

(2)    procedures to allow the prescribing physician to request and receive notification of any delay or negative decision in regard to a prior authorization request;

(3)    procedures to allow the prescribing physician to request and receive a second review of any denial of a prior authorization request; and

(4)    procedures to allow a pharmacist to dispense an emergency, seventy-two hour supply of a drug requiring prior authorization without such prior authorization if the pharmacist:

(a)    has made a reasonable attempt to contact the prescribing physician and request that the prescribing physician secure prior authorization; and

(b)    reasonably believes that refusing to dispense a seventy-two hour supply would unduly burden the Medicaid recipient and produce undesirable health consequences.

Section 44-6-1240.    A grant of prior authorization for a drug is specific to the drug, rather than the actual prescription, and extends to all refills allowed pursuant to the original prescription and to subsequent prescriptions for the same drug at the same dosage if the time allowed by the prior authorization has not expired.

Section 44-6-1250.    A Medicaid recipient who has been denied prior authorization for a prescribed drug is entitled to appeal this decision through the department's appeals process.

Section 44-6-1260.    For prescriptions reimbursed by the department, a Medicaid recipient is deemed to have consented to substitution of a less costly generic equivalent satisfying the individual consent requirements of Section 40-43-86(H)(6).

Subarticle 3

Effective Medicaid State Agency Service Management

Section 44-6-1310    (A).    The director of the department periodically shall convene, but not less than quarterly and no more than monthly, meetings of the directors of all state agencies receiving General Fund appropriations for the purpose of state matching funds for Medicaid services. The purpose of these meetings is to identify, without limitation:

(1)    methods to contain the growth of Medicaid spending;

(2)    methods to improve the quality of and recipient satisfaction with Medicaid state agency services;

(3)    opportunities for consolidation and methods to improve the efficiency and effectiveness of existing service delivery;

(4)    opportunities for education and prevention;

(5)    annually the number of persons on waiting lists to receive services and the type of services for each list; and

(6)    the collective priority of critical needs for the Medicaid population.

(B)    The department annually shall compile the results of these meetings and provide them to the Governor and the Senate Finance Committee, Senate Medical Affairs Committee, House Ways and Means Committee, and House Medical, Military, Public and Municipal Affairs Committee.

Section 44-6-1320.    By December thirty-first of each year, the department shall submit to the Governor and the Senate Finance Committee, Senate Medical Affairs Committee, House Ways and Means Committee, and House Medical, Military, Public and Municipal Affairs Committee Medicaid expenditures made to other state agencies in the preceding state fiscal year. The report must include, but is not limited to:

(1)    amounts paid to each agency according to category of service; and

(2)    rates paid to each state agency and the associated methodology used in developing those rates.

Section 44-6-1330.    (A)    The department shall develop outcome results-based objectives for Medicaid service and administrative contracts with other state agencies. Reimbursement must be based on the completion of outcomes, as appropriate.

(B)    The department shall identify payment rates for Medicaid services provided by other state agencies that exceed available comparable market rates and develop methods to ensure that, where appropriate, rates are the lower of cost or market. To ensure that the provisions of this section are met and that duplicative services are not provided to Medicaid recipients, the department may limit Medicaid services provided by other state agencies.

Section 44-6-1340.    (A)    The department shall develop an annual plan to conduct periodic audits, reviews, and inspections of state agencies receiving Medicaid funds for the purpose of:

(1)    ensuring compliance with state and federal regulations;

(2)    promoting accountability, economy, effectiveness, and efficiency; and

(3)    preventing and detecting waste, fraud, and abuse.

(B)    Audits and reviews must be performed in accordance with Generally Accepted Government Auditing Standards, commonly referred to as the 'yellow book'.

(C)    Reports must be issued in accordance with professional standards and must include a description of any significant problems, abuses, and deficiencies encountered in the administration and operation of Medicaid services along with recommendations for corrective action. Reports must include the financial value of any items reported.

(D)    The department is authorized to directly access all systems, records, reports, reviews, files, documents, papers, and similar information related to Medicaid payments within state agencies and entities doing business with these agencies.

(E)    The department may enter into external contracts as necessary in fulfilling the requirements of this section.

(F)    The department shall withhold any amounts related to fraud, abuse, and non-compliance.

(G)    The department shall make all reports available to the Governor and the Senate Finance Committee, Senate Medical Affairs Committee, House Ways and Means Committee, and House Medical, Military, Public and Municipal Affairs Committee."

SECTION    3.    Article 1, Chapter 6, Title 44 of the 1976 Code is amended by adding:

"Section 44-6-110.    (A)    The department shall develop eligibility determination criteria and processes for full benefit Medicaid applicants that:

(1)    provide for face-to-face initial and continued eligibility determinations when administratively feasible and cost-effective;

(2)    prevent the routine initiation of coverage until verification of all required eligibility information is complete unless the applicant is a pregnant woman;

(3)    require verification of all unearned income including, but not limited to, child support or alimony;

(4)    require proof of citizenship or legal alien status when the department has reasonable grounds to believe that the applicant is not a citizen or legal alien;

(5)    require proof of South Carolina residency when the department has reasonable grounds to believe that the applicant is not a state resident;

(6)    require the applicant, the applicant's legal guardian or other responsible party, or the applicant's power of attorney to sign the application attesting to the accuracy of the information provided; and

(7)    require at least annual continuing eligibility determinations using the same standards as applied to the initial eligibility determination process.

(B)    The department shall require that all files pertaining to Medicaid eligibility of an agency employee, a member of an agency employee's family, including, but not limited to, a spouse, parent, step-parent, grandparent, step-grandparent, child, step-child, sibling, or step-sibling, or an individual residing with an agency employee be transferred to a central location for processing.

(C)    The department shall conduct regular audits of eligibility files for completeness and accuracy. The files reviewed must be selected by an approved statistical method that ensures a reasonable competency level.

(D)    The department shall maintain an electronic interface with the South Carolina Employment Security Commission to provide employment and earning information on Medicaid applicants.

(E)    The department shall structure the eligibility determination function in a manner that is administratively efficient.

(F)    Notwithstanding any other provision of law and except as provided below, a promissory note received after July 1, 2004, by a Medicaid applicant or recipient or the spouse of a Medicaid applicant or recipient in exchange for assets that if retained by the applicant or recipient or his spouse would cause the applicant or recipient to be ineligible for Medicaid benefits is, for Medicaid eligibility purposes, deemed to be fully negotiable under the laws of this State unless it contains language plainly stating that it is not transferable under any circumstance. To be considered valid for Medicaid eligibility determination purposes, a promissory note must be actuarially sound, require monthly installments that fully amortize over the life of the loan, and be free of any conditional or self-canceling clauses.

(G)    The department shall contract with an independent, external entity to periodically review eligibility error determination procedures and related results and shall report this information to the Governor and Senate Finance Committee, Senate Medical Affairs Committee, House Ways and Means Committee, and House Medical, Military, Public and Municipal Affairs Committee."

SECTION    4.    Section 44-6-80 of the 1976 Code is amended to read:

"Section 44-6-80.    The department must submit to the Governor, the State Budget and Control Board, and the General Assembly an annual report concerning the work of the department including details on improvements in the cost effectiveness achieved since the enactment of this chapter and must recommend changes for further improvements.

Interim reports must be submitted as needed to advise the Governor and the General Assembly of substantive issues.

(A)    Within six months of the end of the state fiscal year, the department shall submit to the Governor and the Senate Finance Committee, Senate Medical Affairs Committee, House Ways and Means Committee, and House Medical, Military, Public and Municipal Affairs Committee an annual report on the status of operations of the Medicaid program for that fiscal year. The report must include, but is not limited to:

(1)    changes to the state's Medicaid plan or other changes requiring federal approval;

(2)    significant policy and procedural changes;

(3)    annual eligibility enrollment; and

(4)    annual total expenditures by service category and the associated administrative expenses.

(B)    By December 31 of each year, the department shall submit to the Governor and the Senate Finance Committee, Senate Medical Affairs Committee, House Ways and Means Committee, and House Medical, Military, Public and Municipal Affairs Committee a report that compares the reimbursement rate of Medicaid providers to similar reimbursement rates of the Medicare Program, the State Health Plan, and other industry and comparable state benchmarks as the department considers appropriate.

(C)    By December 31 of each year, the department, in conjunction with the Office of Research and Statistics of the Budget and Control Board and other entities at the department's discretion, shall submit to the Governor and the Senate Finance Committee, Senate Medical Affairs Committee, House Ways and Means Committee, and House Medical, Military, Public and Municipal Affairs Committee a forecast of Medicaid enrollment and utilization for the following three state fiscal years.

(D)    The department shall report to the Governor and the Senate Finance Committee, Senate Medical Affairs Committee, House Ways and Means Committee, and House Medical, Military, Public and Municipal Affairs Committee any disallowance of federal expenditures by the Centers for Medicare and Medicaid Services within fifteen days of notification of a disallowance.

(E)    The department shall participate in any payment error rate and measurement program required by the Centers for Medicare and Medicaid Services and report results annually to the Governor and the Senate Finance Committee, Senate Medical Affairs Committee, House Ways and Means Committee, and House Medical, Military, Public and Municipal Affairs Committee.

(F)    The department shall maintain an internal audit unit to conduct reviews, audits, investigations, and other inspections of agency operations and external agency agreements. The unit must be located within the department so as to maintain maximum independence and objectivity. The audit director shall report to no less than a deputy director. Access by the unit's director to the executive director must be maintained without hindrance or obstruction. The unit shall submit, to the executive director for approval, a comprehensive annual audit plan that may include contracting with external entities for performance of audits."

SECTION 5. Article 3, Chapter 6, Title 44 of the 1976 Code is amended to read:

"Article 3

Child Development Services

Medicaid Fraud and Abuse Management

"Section 44-6-300.    The Department of Health and Human Services shall establish child development services in the following counties: Allendale, Bamberg, Barnwell, Calhoun, Cherokee, Chester, Chesterfield, Fairfield, Jasper, Lexington, Newberry, and Orangeburg. The services established in each county must provide at least thirty slots for the children of that county. (A)    In accordance with federal law, the department shall conduct audits, reviews, investigations, and inspections of providers, including other state agencies, and recipients in order to prevent and detect fraud, abuse, and waste in the Medicaid program.

(B)    The department shall only reimburse for medically necessary covered services provided to Medicaid recipients. For purposes of this section:

(1)    'Medically necessary services' are those services that are of an amount, duration, and scope that is:

(a)    provided in accordance with all applicable state and federal Medicaid laws, regulations, manual provisions, bulletins, and other directives; and

(b)    directed toward the maintenance, restoration, or protection of health or toward the diagnosis and treatment of illness or disability.

(2)    'Covered services' means services that are clearly and specifically included as covered in the Medicaid State Plan, provider manual, including published bulletins or other directives.

(C)    The department may sanction providers found to be in violation of this section. These sanctions may include, but are not limited to, any or all of the following:

(1)    denial of payment, in whole or in part, or recovery of overpayments, in whole or in part;

(2)    rejection of a prospective provider's application for participation in the Medicaid program;

(3)    suspension or termination of a Medicaid provider agreement;

(4)    assessment of a fine, which must be promulgated, by the department in regulation; and

(5)    assessment of an interest charge, which must be promulgated by the department in regulation, from the date of claim payment to the date of repayment on amounts paid to the provider in excess of amounts that are appropriately due under Medicaid program policies and procedures.

(D)    The department shall monitor recipients' use of Medicaid benefits and develop interventions or sanctions for recipients identified misusing Medicaid benefits.

Section 44-6-320.    The establishment and expansion of the child development services mandated by Sections 44-6-300 and 44-6-310 must be accomplished within the limits of the appropriations provided by the General Assembly in the annual General Appropriations Act for this purpose and in accordance with the Department of Health and Human Services policies for child development services funded through Title XX. (A) The department is authorized to expand its fraud and abuse efforts by using internal and external resources including, but not limited to, the ability to contract with other entities for the purpose of maximizing the department's ability to prevent and detect Medicaid fraud, abuse, and waste.

(B)    The department may contract with the Attorney General's Office to conduct investigations of recipients suspected of Medicaid fraud and abuse including, but not limited to:

(1)    submitting false applications or providing false or misleading information in order to obtain Medicaid benefits;

(2)    sharing or selling the Medicaid card;

(3)    diverting or reselling prescription drugs and other goods or supplies provided by Medicaid; and

(4)    otherwise fraudulently obtaining Medicaid benefits to which they were not entitled.

(C)    The department shall meet at least quarterly with the staff of the Attorney General's Office involved in Medicaid provider and recipient fraud, abuse, and waste investigation and prosecution to determine the status of cases referred to the Attorney General's Office and ensure that both entities are expeditiously pursuing their responsibilities in this regard."

SECTION    6.    Article 1, Chapter 71, Title 38 of the 1976 Code is amended by adding:

"Section 38-71-270.    (A)    The Department of Health and Human Services must be the payer of last resort for every Medicaid beneficiary that has third party health coverage or insurance. Every insurer must pay or every Plan Administrator must authorize payment of benefits for a Medicaid beneficiary with third party health coverage or insurance prior to any benefit being paid by the Medicaid program. Each Plan Sponsor must direct its Pharmacy Benefit Managers (PBM) and other medical carriers to cooperate with Medicaid to identify Medicaid beneficiaries with insurance coverage. An insurer or Plan Administrator must also reimburse the Medicaid program for claims that Medicaid has submitted and made payment on for which the insurer is primarily liable.

(B)    The department is authorized to enter into cooperative agreements with insurers to establish mutually agreeable procedures for the exchange of information related to determining whether a Medicaid beneficiary has third party coverage that should pay claims prior to Medicaid. The department must develop technology to allow the determination of third party coverage to be made online. No more than twice a year, the department must provide data tapes containing the names on the Medicaid rolls to every insurer on the Market Share Listing maintained by the Department of Insurance. Within forty-five days of receiving the list of Medicaid recipients, each insurer must identify to the department all of the insurers' subscribers, policyholders, and covered dependents whose names also appear on the Medicaid rolls. Information furnished to the department is limited to that information the department determines is necessary to decide whether benefits are available to Medicaid beneficiaries so that future claims can be cost avoided and previously paid claims may be reimbursed to the department."

SECTION    7.    Section 43-3-65 of the 1976 Code, as added by Section 59A, Part II, Act 155 of 1997, is amended to read:

"Section 43-3-65.    The governing authorities of each county shall provide office space and facility service, including janitorial, utility and telephone services, and related supplies, for its the Department of Health and Human Services eligibility processing and the county Department of Social Services."

SECTION    8.    Joint Resolution 370 of 2002 is repealed.

SECTION    9.    If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this act, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.

SECTION    10.    The repeal or amendment by this act of any law, whether temporary or permanent or civil or criminal, does not affect pending actions, rights, duties, or liabilities founded thereon, or alter, discharge, release or extinguish any penalty, forfeiture, or liability incurred under the repealed or amended law, unless the repealed or amended provision shall so expressly provide. After the effective date of this act, all laws repealed or amended by this act must be taken and treated as remaining in full force and effect for the purpose of sustaining any pending or vested right, civil action, special proceeding, criminal prosecution, or appeal existing as of the effective date of this act, and for the enforcement of rights, duties, penalties, forfeitures, and liabilities as they stood under the repealed or amended laws.

SECTION    11.    Unless otherwise provided, this act takes effect upon approval by the Governor.

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