---
kind: "section"
citation: "42 C.F.R. § 422.382"
title: "42"
number: "422.382"
heading: "Minimum net worth amount."
url: "https://uscodex.org/cfr/42/422.382"
---

# §422.382. Minimum net worth amount.

- (a) At the time an organization applies to contract with CMS as a PSO under this part, the organization must have a minimum net worth amount, as determined under [paragraph (c)](#c) of this section, of:
  - (1) **At least $1,500,000, except as provided in paragraph (a)(2) of this section.**
  - (2) No less than $1,000,000 based on evidence from the organization's financial plan (under [§ 422.384](/cfr/42/422.384.md)) demonstrating to CMS's satisfaction that the organization has available to it an administrative infrastructure that CMS considers appropriate to reduce, control or eliminate start-up administrative costs.
- (b) After the effective date of a PSO's MA contract, a PSO must maintain a minimum net worth amount equal to the greater of—
  - (1) One million dollars;
  - (2) Two percent of annual premium revenues as reported on the most recent annual financial statement filed with CMS for up to and including the first $150,000,000 of annual premiums and 1 percent of annual premium revenues on premiums in excess of $150,000,000;
  - (3) An amount equal to the sum of three months of uncovered health care expenditures as reported on the most recent financial statement filed with CMS; or
  - (4) **Using the most recent financial statement filed with CMS, an amount equal to the sum of—**
    - (i) Eight percent of annual health care expenditures paid on a non-capitated basis to non-affiliated providers; and
    - (ii) Four percent of annual health care expenditures paid on a capitated basis to non-affiliated providers plus annual health care expenditures paid on a non-capitated basis to affiliated providers.
    - (iii) Annual health care expenditures that are paid on a capitated basis to affiliated providers are not included in the calculation of the net worth requirement (regardless of downstream arrangements from the affiliated provider) under paragraphs [(a)](#a) and [(b)(4)](#b-4) of this section.
- (c) **Calculation of the minimum net worth amount—**
  - (1) **Cash requirement.**
    - (i) At the time of application, the organization must maintain at least $750,000 of the minimum net worth amount in cash or cash equivalents.
    - (ii) After the effective date of a PSO's MA contract, a PSO must maintain the greater of $750,000 or 40 percent of the minimum net worth amount in cash or cash equivalents.
  - (2) **Intangible assets.** An organization may include intangible assets, the value of which is based on Generally Accepted Accounting Principles (GAAP), in the minimum net worth amount calculation subject to the following limitations—
    - (i) **At the time of application.**
      - (A) Up to 20 percent of the minimum net worth amount, provided at least $1,000,000 of the minimum net worth amount is met through cash or cash equivalents; or
      - (B) Up to 10 percent of the minimum net worth amount, if less than $1,000,000 of the minimum net worth amount is met through cash or cash equivalents, or if CMS has used its discretion under [paragraph (a)(2)](#a-2) of this section.
    - (ii) **From the effective date of the contract.**
      - (A) Up to 20 percent of the minimum net worth amount if the greater of $1,000,000 or 67 percent of the minimum net worth amount is met by cash or cash equivalents; or
      - (B) Up to ten percent of the minimum net worth amount if the greater of $1,000,000 or 67 percent of the minimum net worth amount is not met by cash or cash equivalents.
  - (3) **Health care delivery assets.** Subject to the other provisions of this section, a PSO may apply 100 percent of the GAAP depreciated value of health care delivery assets (HCDAs) to satisfy the minimum net worth amount.
  - (4) **Other assets.** A PSO may apply other assets not used in the delivery of health care provided that those assets are valued according to statutory accounting practices (SAP) as defined by the State.
  - (5) **Subordinated debts and subordinated liabilities.** Fully subordinated debt and subordinated liabilities are excluded from the minimum net worth amount calculation.
  - (6) **Deferred acquisition costs.** Deferred acquisition costs are excluded from the calculation of the minimum net worth amount.

## Notes

### Amendments

[63 FR 25377, May 7, 1998, as amended at 64 FR 71678, Dec. 22, 1999]

### Authority

Authority: 42 U.S.C. 1302, 1306, 1395w-21 through 1395w-28, and 1395hh.

### Source

Source: 63 FR 18134, Apr. 14, 1998, unless otherwise noted.

### Amendments

[63 FR 25377, May 7, 1998, as amended at 64 FR 71678, Dec. 22, 1999]