(a) Basis. Section 1903(g) of the Act requires that FFP for long-stay inpatient services at a level of care be reduced, by a specified formula, for any quarter in which a State fails to make a satisfactory showing that it has an effective program of utilization control for that level of care.

(b) Purpose. This subpart specifies—

(1) What States must do to make a satisfactory showing;

(2) How the Administrator will determine whether reductions will be imposed; and

(3) How the required reductions will be implemented.

(c) Scope. The reductions required by this subpart do not apply to—

(1) Services provided under a contract with a health maintenance organization; or

(2) Facilities in which a QIO is performing medical and utilization reviews under contract with the Medicaid agency in accordance with § 431.630 of this chapter.