[Code of Federal Regulations]
[Title 42, Volume 3]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR431.54]

[Page 26-27]
 
                         TITLE 42--PUBLIC HEALTH
 
  CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF 
                 HEALTH AND HUMAN SERVICES--(Continued)
 
PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION--Table of Contents
 
             Subpart B--General Administrative Requirements
 
Sec. 431.54  Exceptions to certain State plan requirements.

    (a) Statutory basis. Section 1915(a) of the Act provides that a 
State shall not be deemed to be out of compliance with the requirements 
of sections 1902(a) (1), (10), or (23) of the Act solely because it has 
elected any of the exceptions set forth in paragraphs (b) and (d) 
through (f) of this section.
    (b) Additional services under a prepayment system. If the Medicaid 
agency contracts on a prepayment basis with an organization that 
provides services additional to those offered under the State plan, the 
agency may restrict the provision of the additional services to 
recipients who live in the area served by the organization and wish to 
obtain services from it.
    (c) [Reserved]
    (d) Special procedures for purchase of medical devices and 
laboratory and X-ray tests. The Medicaid agency may establish special 
procedures for the purchase of medical devices or laboratory and X-ray 
tests (as defined in Sec. 440.30 of this chapter) through a competitive 
bidding process or otherwise, if the State assures, in the certification 
required under Sec. 431.51(d), and CMS finds, as follows:
    (1) Adequate services or devices are available to recipients under 
the special procedures.
    (2) Laboratory services are furnished through laboratories that meet 
the following requirements:
    (i) They are independent laboratories, or inpatient or outpatient 
hospital laboratories that provide services for individuals who are not 
hospital patients, or physician laboratories that process at least 100 
specimens for other physicians during any calendar year.
    (ii) They meet the requirements of subpart M of part 405 or part 482 
of this chapter.
    (iii) Laboratories that require an interstate license under 42 CFR 
part 74

[[Page 27]]

are licensed by CMS or receive an exemption from the licensing 
requirement by the College of American Pathologists. (Hospital and 
physician laboratories may participate in competitive bidding only with 
regard to services to non-hospital patients and other physicians' 
patients, respectively.)
    (3) Any laboratory from which a State purchases services under this 
section has no more than 75 percent of its charges based on services to 
Medicare beneficiaries and Medicaid recipients.
    (e) Lock-in of recipients who over-utilize Medicaid services. If a 
Medicaid agency finds that a recipient has utilized Medicaid services at 
a frequency or amount that is not medically necessary, as determined in 
accordance with utilization guidelines established by the State, the 
agency may restrict that recipient for a reasonable period of time to 
obtain Medicaid services from designated providers only. The agency may 
impose these restrictions only if the following conditions are met:
    (1) The agency gives the recipient notice and opportunity for a 
hearing (in accordance with procedures established by the agency) before 
imposing the restrictions.
    (2) The agency ensures that the recipient has reasonable access 
(taking into account geographic location and reasonable travel time) to 
Medicaid services of adequate quality.
    (3) The restrictions do not apply to emergency services furnished to 
the recipient.
    (f) Lock-out of providers. If a Medicaid agency finds that a 
Medicaid provider has abused the Medicaid program, the agency may 
restrict the provider, through suspension or otherwise, from 
participating in the program for a reasonable period of time.
    Before imposing any restriction, the agency must meet the following 
conditions:
    (1) Give the provider notice and opportunity for a hearing, in 
accordance with procedures established by the agency.
    (2) Find that in a significant number or proportion of cases, the 
provider has:
    (i) Furnished Medicaid services at a frequency or amount not 
medically necessary, as determined in accordance with utilization 
guidelines established by the agency; or
    (ii) Furnished Medicaid services of a quality that does not meet 
professionally recognized standards of health care.
    (3) Notify CMS and the general public of the restriction and its 
duration.
    (4) Ensure that the restrictions do not result in denying recipients 
reasonable access (taking into account geographic location: and 
reasonable travel time) to Medicaid services of adequate quality, 
including emergency services.