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Pulling the Plug

How a national health-care company named HCA came in and killed a hospital right under our noses--with no concern about who might pay with their lives as a result

By Loren Stein

SAN JOSE POLICE officer Danny Ichige felt the hot steel of a bullet ripping into his belly just below his bulletproof vest and thought: This is it. It was 1:30 in the morning, in southeast San Jose, and the 32-year-old Ichige had been shot by a distraught man whose former girlfriend told police he was threatening her outside her home and had assaulted her and her friends earlier that night. Falling to the ground, Ichige returned fire, but missed. Backup officers arrived, quickly put him in the back seat of a patrol car and drove full speed to the trauma center at San Jose Medical Center, some 10 miles away. They couldn't wait for an ambulance; Ichige was in critical condition and at any moment could die.

"I kept covering the wound with my hand and felt the warm blood," remembers Ichige of the March night in 2000. During emergency surgery the doctors removed a foot of his large intestine. "I was lucky, not only working with the people I do but to have gone to such a world-renowned trauma center," he says. "I have the highest respect for that hospital; I got excellent care. They saved my life. Not a minute goes by when I don't feel lucky to be alive." Ichige returned to the graveyard shift six months later. Meanwhile, his assailant shot and killed himself later that night.

San Jose Medical Center's downtown trauma center is the busiest of three certified trauma centers in Santa Clara County--units that offer specialized care for severe injuries. Equipped with a helipad and supported by two helicopter services, it's been a leader in trauma services for more than a decade. (The other two are Valley Medical Center and Stanford Medical Center.) The hospital's emergency room--which receives more life-threatening ambulance calls than any other emergency room in the county--was named emergency room of the year last year by California Emergency Physicians. Opened in 1923, the general acute-care hospital has 340 beds, treats roughly 26,000 patients a year, has 600 doctors, and is recognized for its skill in treating high-risk cases and serving the diverse and growing populations of the inner city and central and east Santa Clara Valley.

But this record of accomplishment will soon come to an end. As early as 2006, San Jose Medical Center will close. The move will leave San Jose, the 11th largest city in the United States., without a full service hospital in its downtown core, a rarity for a major urban city center. It will force thousands of residents to seek medical services farther away from their homes and jobs and could jeopardize emergency care for those who depend on it.

"Training officers will frequently tell rookies, 'In case I get shot take me to San Jose Medical Center,' " says San Jose Police Officers Association president Don DeMers. He cites the case of officer Gordon Silva, who was among two policemen that were shot (one fatally) at Fifth and Santa Clara streets in 1989. Although officer Silva died from his wounds, "He wouldn't have had a chance if the Med Center wasn't there," says DeMers. "His aorta was shredded. ...Two and a half miles if you're bleeding to death is a long way."

What upsets many residents, scores of neighborhood, community and labor groups and many local political leaders is that the decision to close the hospital, announced in late June, was unilaterally made by a massive for-profit hospital chain based in Nashville, Tenn., far removed from the issues confronting San Jose.

Columbia/HCA--now named HCA, the Healthcare Company, in its latest attempt to distance itself from charges of widespread fraud and a reputation for putting profits above patients--purchased San Jose Medical Center in 1996. Its proposed solution: relocating the trauma center and many services to Alexian Brothers Hospital (renamed "Regional" after it was also bought by the company in 1998) in east San Jose, 2 1/2 miles away.

As a result of this decision, just one hospital will serve over 35 percent of Santa Clara County on its eastern border, says Roz Dean of Save the San Jose Medical Center Coalition, which has 76 group members. The rest of the county's more affluent residents will be comfortably served by six hospitals, she says. "We feel this is a redlining issue," says Dean, who, with her late husband Al Traugott, has devoted the last three years to leading the fight to keep the hospital open.

"This is what HCA does," she says. "They buy several hospitals in one geographical area and close the hospital in the poorest community because it's not making enough money--as far as they're concerned. HCA is in the business for profit, so whatever they do is profit-driven. That alone determines why and where to close a hospital. ... It's an insult to a community. I'm outraged by it."

Of little concern to HCA, say coalition members, is the fact that the downtown area is rapidly expanding, and along with it, demands for medical services. The construction of a thousand new residential units each year (the mayor's stated goal), the renovation of City Hall, a new library, two new hotels, an expanded international airport, more office and retail space and the extension of BART to downtown all promise to spike the number of people living and working there as well as visiting.

Mayor Ron Gonzales has said he wants San Jose to be an urban center, a world-class city, as have the two mayors before him. But is the city putting its population at a huge risk, without a centrally located hospital?

"This issue goes to the viability of San Jose as a major league city," says Don Gagliardi, a lawyer and president of the 13th Street Neighborhood Advisory Committee and a coalition member. "All these grandiose plans for downtown are going to amount to nothing if we don't have adequate medical services for people in the area. ... People will die as a result of this decision."

Roz Dean
Intensive Care: Roz Dean, along with her late husband, Al Traugott, took up the crusade to save San Jose Medical Center in early 1999, enlisting 45 community groups. But despite their best efforts, they could not get the city and county to work together.

DESPITE SUSPICION, protests and opposition, there seems to have been little anyone could do to stop the sale of San Jose Medical Center, or, for that matter, four other local hospitals, to HCA. In 1996 the company bought the hospital, along with Good Samaritan, Mission Oaks and Gilroy's South Valley, in one deft business deal from their owner, Health Dimensions, for an undisclosed sum. The deal was green-lighted by both the attorney general's office and the courts. (Much of the sale money was converted into a foundation, the Health Trust of Santa Clara Valley, to plough back into the community the many years of public investment in the hospitals, as is required by state law. South Valley was later sold to Catholic Healthcare West, the owner of O'Connor Hospital at the time.) HCA was clear in its expectations: it intended to make a profit of $40 million in its first year, according to a 1996 article in The Nation.

Two years later, in 1998, HCA acquired the nonprofit, Catholic Alexian Brothers Hospital, in a swap for its two Chicago-area hospitals. (Alexian also gave HCA an undisclosed amount of cash; according to the Chicago Tribune the amount was $229 million.)

The surprise Alexian Brothers exchange and acquisition came as an additional shock to the community, especially since Alexian's mission was as a charitable hospital. Fearing the end of a long tradition of caring for the poor on San Jose's East Side, Santa Clara County supervisors challenged the Alexian sale and asked that the attorney general's office investigate. The attorney general's office, whose powers had been expanded since 1996, put several conditions on the transaction, including price controls and a mandate that charity care be delivered at the same level for five years. Again, the sale went through. The name of Alexian Brothers was changed to Regional in 1999.

HCA is now the valley's largest hospital owner, controlling three out of the city's six hospitals and an estimated 53 percent of the city's hospital beds. One immediate result: money spent on charity care was reduced at Good Samaritan by 89 percent in HCA's first year of operation. At San Jose Medical Center, charity care dropped 46 percent in the same time period.

"To rely on one company to play such a huge public health role in Santa Clara County is frightening," says San Jose City Councilmember Cindy Chavez, an early supporter of the coalition and a staunch advocate for maintaining medical and emergency services in the city's center. "What's more, to rely on a company that needs a certain amount of profit for your community to be worth investing in is unnerving."

San Jose Medical Center is located in the busiest police district in the city. It's also a region with serious health and economic issues. Despite a three-decade, $1 billion publicly funded redevelopment effort, downtown remains the lowest income area in the county. It has the highest number of Latino and ethnic residents. Many residents do not have health insurance. It has a large population of low-income at-risk seniors, who use a disproportionate share of health- care services.

Countywide, the area most directly affected by the hospital's closure has the highest percentage of infant mortality, AIDS death rates, deaths from coronary heart disease, homicide, suicide, child poisoning, diabetes, sexually transmitted diseases, teenage births, and hospitalizations due to injuries of all kinds, including assault, firearm and car crash victims.

As San Jose Medical Center is located on a 24-hour bus line and Regional currently is not, it will mean poorer residents and the elderly living downtown can't use public transportation to get medical care. Also, unlike San Jose Med, Regional is not close to several intersecting freeways, making it less accessible if there is a citywide emergency.

"With the anticipated closure, the underserved in the downtown and East Side of San Jose will be in a desperate situation," wrote Al Traugott in La Oferta two years ago. "One can only imagine the carnage when we have a major catastrophe such as a fire, explosion or earthquake."

Al Traugott
Requiem for a Dream: Al Traugott, a tireless crusader for saving the San Jose Medical Center, died at age 78 from a heart attack that he suffered during a protest in front of the county building May 22.

BY OUTWARD APPEARANCES, it took HCA six years to decide whether it was in its financial interest to keep San Jose Medical Center open, or close it and consolidate services with Regional. The mayor (with the unanimous support of the City Council), the Human Rights Commission, the Council of Churches of Santa Clara Valley, and the San Jose Police Officers Association, after learning of the discussion, all wrote letters in 2000 asking the company to spare the hospital. So did Dr. James Hinsdale, head of the hospital's trauma center for the past 18 years, who said he feared that the trauma center could not be successfully moved to Regional. San Jose Medical Center's new CEO Steve Dixon said in June that the "very difficult but understandable decision" to close the hospital had been based upon "financial reality" faced by HCA. (Several sources interviewed for this article said that Dixon personally felt there was a good case for keeping the hospital open.)

In the company's view, those financials include an aging facility, a 10-acre site with limited room to expand, and the fact that the medical center was losing millions of dollars each year. (Over the last six years the medical center lost a total of $48.5 million, including a recorded $24.6 million loss in 1997 and a $3.9 million loss in 2001.) Moreover, HCA estimated that the company would need to shell out $100 million to seismically retrofit the downtown hospital to comply with state hospital laws taking effect in 2008. In contrast, the newer Regional, with 32 acres, has more room to expand and will need perhaps $30 million to make the hospital earthquake safe.

However, according to records provided by SEIU Local 250, a union representing hospital workers, San Jose Med would have made a $1.3 million profit in 2000 if it had not had to pay HCA more than $2.1 million for unspecified "services" that year. Similarly, the hospital would have cleared a small profit if it had not paid HCA $3.8 million for similar expenses in 1999.

Meanwhile, HCA's appearance of wavering about what to do with the medical center stymied community activists who wanted the city and county to take action. First HCA officials told staff nurses that they'd keep the hopital open and rebuild it; then in 1998 they said they would close the hospital in 2003; then they said there'd be a partial closure. (After saying in 1999 that they'd expand the obstetrical unit, they closed and shifted it to Regional just one year later.) Then came ads saying $166 million would be spent to consolidate at Regional, and then they changed their mind again, putting their plans on hold to revisit the possibility of keeping the hospital open. Finally, two months ago, corporate headquarters made their final decision: San Jose Med wasn't worth the investment.

"Representations that they've made to us all along are not being followed," Mayor Gonzales was quoted as saying in GlobeSt. com, a real estate website. "I'm very concerned about us losing a medical center in the heart of the city."

The delays were not intentional, says HCA corporate spokesperson Jeff Prescott. "If our goal was to [just] buy hospitals and close and consolidate them, we wouldn't wait years to do that because we wouldn't achieve our goal fast enough," he says. "We do a better job in the long run in a community like San Jose by focusing our resources on the needs of the area, investing in state-of-the-art equipment and services, and providing very high-quality health care rather than diluting it over a variety of places." HCA, he says, plans to pump $100 million into Regional to transform it into a modern health-care facility with a vastly expanded emergency room and more hospital beds, among other improvements.

But state Assemblyman Manny Diaz (D-San Jose)--whose concern stretches back to his days on the City Council at the time HCA came on the scene--remains unconvinced that the company's decision is based on sound reasoning. "Nobody has been able to really tell me why we should close the hospital down," or, he says, why there shouldn't be another hospital in its place. "Prove it to me," he says.

"This [hospital] system was hemorrhaging cash and on the verge of defaulting on its bonds" when it was purchased by then Columbia/HCA in 1996, counters San Jose Medical Center spokesperson Leslie Kelsay. (She also says the hospital is still not operating with a positive margin, noting that 70 percent of their patients are on MediCal or Medicare or are self-pay.)

To stem the losses, HCA initiated a round of layoffs when it first came on board. Previous service and staff cuts were also made before the purchase to make it a more attractive sale. "Staffing has been cut to the bone" at all three HCA-owned hospitals, says Sal Rosselli, president of SEIU Local 250, which has staged several recent strikes over the issue. "Their [HCA's] MO is to squeeze every dollar possible meant for patient care out of the community and into their shareholders' pockets. How much is enough? No amount is enough."

According to company records, HCA posted close to $1 billion in profits in 2001.

The buzz among many doctors at San Jose Med is that they're not willing to make the move to Regional, says Jean Suyenaga, a lab assistant at the hospital for 14 years. "The doctors and nurses I know are outraged," she says. "You can't just close it because you think it's not making enough profit. The services are needed in this area. To close it would be devastating."

But this kind of criticism doesn't faze HCA's Kelsay. "Many people in this community have emotional ties to this hospital, but it just isn't practical or economically feasible to construct a seismically safe facility that's required at this site," says Kelsay. "The unfortunate reality is that San Jose is the first community among many across the state that will be going through the same decision-making process."

AL TRAUGOTT, his wife, Roz Dean, and other coalition members were not only frustrated by HCA's ability to keep local politicians at bay by not making a firm decision about its plans for San Jose Medical Center; they also felt let down by some local leaders who they believed they could trust. Nevertheless, Al Traugott and his wife, Roz Dean, were not strangers to long, hard fights.

Al Traugott took up the crusade to save San Jose Medical Center in early 1999. A member of the Labor Party who cared deeply about affordable, high-quality health care, human rights and peace and justice issues, Traugott was a tireless and ferocious organizer. "Al's a very intense person," says Dean, 70. "When he gets involved and believes in something, he goes all out." With his activist connections, it took him only a few months to enlist 45 groups to help save the downtown medical center. The first demonstration was held in the spring of 1999 in front of the hospital, attended by Councilmember Cindy Chavez, Assemblyman Manny Diaz and South Bay Labor Council's Amy Dean.

But despite their best efforts, Traugott and the coalition could not get the city and county to work together to tackle the issues presented by HCA's buyout of the hospital. While the City Council was very responsive to their concerns, Dean says, they were bitterly disappointed that the county, particularly the county's health and hospital committee, ignored them.

Bob Sillen, chief of the county's Santa Clara Valley Health and Hospital System, suggested that with his help they draft a proposal for an impact study to examine the effect of the hospital's closure on the downtown community, which could prompt the supervisors to take action. With Councilmember Chavez's help, the City Council last year approved $50,000 for the study, which was contingent on matching funds from the county. But the chair of the health and hospital committee, Supervisor Liz Kniss, repeatedly refused to hear coalition members or put the study on the agenda, Deans says, and the committee refused to commit to the money. Phone calls were not returned, requests for meetings with supervisors were denied.

"The county Board of Supervisors did not want to be held financially responsible for guaranteeing a hospital if residents demanded it or the impact study showed a necessity for it," says Dean. "We used up two years of our time to write the study, which Bob Sillen suggested and then backed away from. Evidently he changed his mind."

"I can't give a definitive answer as to why the county didn't fund the study," says Sillen, who speculates that the county doesn't want to be perceived as being primarily responsible for preserving or establishing a downtown hospital, which is not a county function.

The closure of San Jose Medical Center did not come to him as any great surprise, he says, especially with the marketplace changing so dramatically. "The hospital was in search of a broader mission. It was never that big. It catered to a relatively small group of physicians and a relatively small portion of the community. I don't think it had that much of a future."

From a corporate perspective, Sillen thinks HCA made the right decision, as San Jose Medical Center was not as financially viable as Good Samaritan or Regional. "If the return on investment was enough to satisfy their stockholders, they would have kept it open. Why would they give away a winning operation?"

Still, he adds, "HCA was not very forthcoming with the community. ... The way they operated here fits the classic pattern of the company: reducing their own competition to themselves. HCA has two primary reputations: they're real good business people and real involved in fraud and abuse. I don't trust them. Never have. I don't trust them at all."

Crowd
Labor and Delivery: On Labor Day SEIU Local 250, which represents hospital workers, protested massive cuts in services and care that HCA has made at the three local hospitals it owns.

HCA RODE INTO TOWN with a notorious track record. The Nashville-based corporation, founded in 1968, is the largest for-profit hospital chain in the world. Its aggressive, even predatory business practices are legendary: snapping up underperforming, underpriced hospitals, making them profitable by cutting staff and services, closing or consolidating weaker facilities and if necessary upgrading others. First named the Hospital Corporation of America, the company merged with Columbia in 1994; at its peak, in 1997, the company owned 350 hospitals and controlled nearly half the for-profit hospital beds in the country.

HCA's mission was to be the McDonald's of the health-care industry. "The day has come when somebody has to do in the hospital business what McDonald's has done in the fast food business and what Wal-Mart has done in the retailing business," a co-founder of Columbia/HCA reportedly said. "Hospitals exist to make money--period," said a former Columbia executive in the Wall Street Journal about the company's credo.

"Columbia/HCA has become a lightning rod for criticism not just because of its prodigious growth and scale but also because of the ferocity of its tactics," wrote business analyst Robert Kuttner of Cambridge, Mass., in a 1996 article in the New England Journal of Medicine. The company flexes its sizable political muscle when it wants to take over a hospital, he said, including hiring top legal talent, finding local medical and political allies and spreading around a lot of money. Their deals, he wrote, "are notable for their speed, secrecy and legal ingenuity ..."

There are countless examples of merciless hospital takeovers by the company. In 1994, HCA shut down Destin Hospital in Okaloosa County, Fla., with only six days' notice; the nearest hospital was 50 miles away. The Washington Post reported in June that the company bought two hospital facilities in northern Virginia and plans to close both, opening a new hospital in another county. Concerns are especially high in the region that they don't have enough emergency beds if case of another terrorist attack. The city of New Port Richey in Florida is up in arms that HCA currently plans to close two hospitals in a poorer area and open another in a more affluent community. "This is really about money, power and control," stated the City Council.

But the company's hardball business tactics came back to haunt them. Beginning in the early 1990s (or some say, even earlier) the company became the subject of FBI raids, whistleblower lawsuits and criminal and civil investigations over a wide range of alleged illegalities--the country's longest and costliest health-care investigation ever. HCA pled guilty in December 2000 to criminal charges in a complex series of schemes to defraud federal health programs of hundred of millions of dollars, including overbilling and defrauding Medicare for nearly a decade and paying doctors kickbacks for patient referrals. The company agreed that year to pay the federal government a settlement of $745 million as well as $95 million in fines and penalties.

In 1997 HCA's CEO was forced to resign and most of its top officers were ousted. Its earnings were in a tailspin and the company was headed towards bankruptcy. The company retrenched: it began downsizing, selling or spinning off more than 100 hospitals. They also decided to transform HCA's corporate culture and public image of putting profits ahead of health care, say company officials. (They also changed their name several times, from Columbia/HCA to HCA, the Healthcare Company; then simply to HCA in 2001).

"These kind of aggressive tactics are exactly what management set about changing," says HCA spokesperson Jeff Prescott. HCA has refocused its strategy to operating leading hospitals in large, growing communities like San Jose, he says.

Currently HCA owns 181 hospitals and 80 outpatient surgery centers in the United States, England and Switzerland. The company has revenues nearing $18 billion; its profits in 2001 were roughly $900 million. It continues to negotiate with the Justice Department over two remaining civil cases.

"The allegations of fraud were a wake-up call for HCA," says San Jose Medical Center's Leslie Kelsay, who previously worked for Alexian Brothers Hospital. "Since 1998, it strikes me as a different company." Yet profits remain as important as health-care delivery, she says. "No hospital can continue to operate long-term unless they can generate the margins to either repay bondholders or provide return on investment to shareholders."

Despite the company rhetoric, HCA's mission is more about market dominance, says Melanie Myers, a researcher with SEIU Local 250. "This is how they do business," says Myers. "HCA goes into a market and buys up hospitals to achieve at least 40 percent market share, and then they close the ones they consider the least profitable and attempt to maintain market share with fewer hospitals. And the community suffers."

San Jose is a microcosm of a much larger trend, say local leaders: the privitization of health care caused by mounting financial pressures from managed care. "The challenge here is that health care is seen as a commodity, like a gas station," says City Councilmember Cindy Chavez. "I'm concerned that something as basic as health care is structured as a for-profit institution."

With corporate health care, the public has no tools to hold companies such as HCA accountable, says Patty Lasky, a labor representative for the California Nurses Association, who represents nurses at San Jose Medical Center, Good Samaritan and Regional. "The system is set up so the people of San Jose have no control or decision-making over health-care facilities in their community. Corporations come in and buy them up and make the decisions for them. That's why the community has to fight back. And look towards elected leaders to help us craft solutions and be the leaders we elected them to be."

SAVE THE SAN JOSE Medical Center Coalition hasn't lost an ounce of steam, even though the hospital does indeed seem to be closing. What the group now wants is to make sure the medical center land stays zoned for a hospital and that the city and county figure out a way to make sure a full-scale hospital is built to serve the downtown community, however that can be accomplished. With several years before San Jose Med vacates the site and moves to Regional, there's still time to map out a strategy.

In July, Supervisor Blanca Alvarado met with some 200 community members sponsored by the 13th Street Neighborhood Advisory Committee, who voiced their fears over the health-care situation downtown. "She finally understood it wasn't just Roz and a few people in the coalition but lots of people in her own district were worried about this, that it was an important issue," says Greg Miller, a nurse at Kaiser Santa Clara and a coalition member.

"I worry about access and about patient choice brought about by the loss of public medical facilities," says Alvarado. "Locally, it's troubling that HCA owns three hospitals in the valley." Alvarado says she'll work with Councilmember Chavez on developing a plan that safeguards the health-care needs of downtown residents, including transportation to Regional and devising a study of the area's heath-care needs to make sure there's no gap in services.

Deputy City Manager James Holgersson is the point person for the city in gathering information on the downtown health-care situation now in progress. "From where we sit we believe there's a strong need in the central core of the city for a health-care presence," he says.

The question is how to bring that about, and whether HCA remains a player on the San Jose Medical Center site. (HCA had reportedly said it would consider using or selling the land for another purpose; Kelsay at San Jose Medical Center said HCA is in the business of health care only.) For one, HCA will have to work with the city over land use issues as it builds up Regional over the next few years. That should give city officials some bargaining power with the company. "HCA doesn't expect to have an easy relationship with the city," says Councilmember Chavez. "HCA has to please its stockholders and we have to protect our community."

Bob Sillen of the county's health system says he'd prefer to see an urgent-care clinic at or near the site. Other clinic options include outpatient surgery, physical therapy or other diagnostic services.

And there are more alternatives: another private hospital company taking over San Jose Med or building a new facility on the site; a community nonprofit doing the same; forming a civic group to take over the hospital; forming a district to purchase the hospital or establishing it as a satellite campus of an existing district hospital. Redevelopment money could also be channeled into helping meet the high costs of retrofitting the current facility. A hospital could also be built on another site, although Dean believes it will be difficult to find a better one downtown.

Assemblyman Manny Diaz says he will hold a public hearing on the matter in December, either at City Hall or in the county chambers, to gather viewpoints, hear testimony and consider the future. "We really haven't had that discussion yet," he says.

In the meantime, Roz Dean is heartened that the city and county are on board to help make sure downtown residents aren't deprived of their access and rights to quality health care. The reason for the turnaround, she says, was twofold. First, HCA's decision to close the hospital is finally a reality. And her beloved husband, Al Traugott, 78, the real leader of the fight, had a heart attack while preparing for a rally on May 22 in front of the county building protesting the supervisors' lack of cooperation.

Traugott suddenly collapsed and was taken by ambulance to San Jose Medical Center. He never regained consciousness and died the next morning. "Al kept this coalition together for three years almost by force of his personal will," says Don Gagliardi. "He was tremendously devoted to this issue. He was so animated, so concerned. He felt it was unjust; he was afraid people would die."

Tens of millions of uninsured people is evidence of a deteriorating health-care system, Traugott wrote before his death. "Until we have universal health care, the burden falls on our community to prevent this closure. Every social gain in the U.S. came about because the people demanded it, and if we make our demands heard clearly and in sufficient numbers, elected officials will act. We must demand that the city and the county use their influence and power to protect the people. Or as Abe Lincoln put it, 'The legitimate object of government is to do for a community of people whatever they need to have done but cannot do well for themselves in their separate and individual capacities.'''

"Al's death woke people up, it shocked them," says his widow, Dean. "I'm not a quitter," she adds quietly, the emotion rising in her voice. "If I did quit, I feel like I'd be deserting Al. I know this is a very long haul; it might haul out longer than I do. I think of this as a lifelong struggle."


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From the September 19-25, 2002 issue of Metro, Silicon Valley's Weekly Newspaper.

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