[Code of Federal Regulations]
[Title 42, Volume 3]
[Revised as of October 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR460.80]

[Page 425]
 
                         TITLE 42--PUBLIC HEALTH
 
  CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF 
                  HEALTH AND HUMAN SERVICES (CONTINUED)
 
PART 460_PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)
--Table of Contents
 
               Subpart E_PACE Administrative Requirements
 
Sec. 460.80  Fiscal soundness.

    (a) Fiscally sound operation. A PACE organization must have a 
fiscally sound operation, as demonstrated by the following:
    (1) Total assets greater than total unsubordinated liabilities.
    (2) Sufficient cash flow and adequate liquidity to meet obligations 
as they become due.
    (3) A net operating surplus or a financial plan for maintaining 
solvency that is satisfactory to CMS and the State administering agency.
    (b) Insolvency plan. The organization must have a documented plan in 
the event of insolvency, approved by CMS and the State administering 
agency, which provides for the following:
    (1) Continuation of benefits for the duration of the period for 
which capitation payment has been made.
    (2) Continuation of benefits to participants who are confined in a 
hospital on the date of insolvency until their discharge.
    (3) Protection of participants from liability for payment of fees 
that are the legal obligation of the PACE organization.
    (c) Arrangements to cover expenses. (1) A PACE organization must 
demonstrate that it has arrangements to cover expenses in the amount of 
at least the sum of the following in the event it becomes insolvent:
    (i) One month's total capitation revenue to cover expenses the month 
before insolvency.
    (ii) One month's average payment to all contractors, based on the 
prior quarter's average payment, to cover expenses the month after the 
date it declares insolvency or ceases operations.
    (2) Arrangements to cover expenses may include, but are not limited 
to, the following:
    (i) Insolvency insurance or reinsurance.
    (ii) Hold harmless arrangement.
    (iii) Letters of credit, guarantees, net worth, restricted State 
reserves, or State law provisions.