---
kind: "section"
citation: "42 C.F.R. § 422.386"
title: "42"
number: "422.386"
heading: "Liquidity."
url: "https://uscodex.org/cfr/42/422.386"
---

# §422.386. Liquidity.

- (a) A PSO must have sufficient cash flow to meet its financial obligations as they become due and payable.
- (b) To determine whether the PSO meets the requirement in [paragraph (a)](#a) of this section, CMS will examine the following—
  - (1) The PSO's timeliness in meeting current obligations;
  - (2) **The extent to which the PSO's current ratio of assets to liabilities is maintained at 1—** 1 including whether there is a declining trend in the current ratio over time; and
  - (3) **The availability of outside financial resources to the PSO.**
- (c) If CMS determines that a PSO fails to meet the requirement in [paragraph (b)(1)](#b-1) of this section, CMS will require the PSO to initiate corrective action and pay all overdue obligations.
- (d) If CMS determines that a PSO fails to meet the requirement of [paragraph (b)(2)](#b-2) of this section, CMS may require the PSO to initiate corrective action to—
  - (1) Change the distribution of its assets;
  - (2) Reduce its liabilities; or
  - (3) **Make alternative arrangements to secure additional funding to restore the PSO's current ratio to 1—** 1.
- (e) If CMS determines that there has been a change in the availability of outside financial resources as required by [paragraph (b)(3)](#b-3) of this section, CMS requires the PSO to obtain funding from alternative financial resources.

## Notes

### Amendments

[63 FR 25378, 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 25378, May 7, 1998, as amended at 64 FR 71678, Dec. 22, 1999]