---
kind: "section"
citation: "42 C.F.R. § 460.80"
title: "42"
number: "460.80"
heading: "Fiscal soundness."
url: "https://uscodex.org/cfr/42/460.80"
---

# §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.**

## Notes

### Authority

Authority: 42 U.S.C. 1302, 1395, 1395eee(f), and 1396u-4(f).

### Source

Source: 64 FR 66279, Nov. 24, 1999, unless otherwise noted.