Editorial Note on Part 431
Editorial Note: Nomenclature changes to part 431 appear at 75 FR 48852, Aug. 11, 2010.

§ 431.54 Exceptions to certain State plan requirements. ( a ) *Statutory basis* — ( 1 ) Section 1915(a) of the Act provides that a State shall not be deemed to be out of compliance with the requirements of sections 1902(a)(1), (10), or (23) of the Act solely because it has elected any of the exceptions set forth in paragraphs (b) and (d) through (f) of this section.
( 2 ) Section 1915(g) of the Act provides that a State may provide, as medical assistance, targeted case management services under the plan without regard to the requirements of sections 1902(a)(1) and 1902(a)(10)(B) of the Act.
( 3 ) Section 1915(i) of the Act provides that a State may provide, as medical assistance, home and community-based services under an approved State plan amendment that meets certain requirements, without regard to the requirements of sections 1902(a)(10)(B) and 1902(a)(10)(C)(i)(III) of the Act, with respect to such services.
( b ) *Additional services under a prepayment system.* If the Medicaid agency contracts on a prepayment basis with an organization that provides services additional to those offered under the State plan, the agency may restrict the provision of the additional services to beneficiaries who live in the area served by the organization and wish to obtain services from it.
( c ) [Reserved]
( d ) *Special procedures for purchase of medical devices and laboratory and X-ray tests.* The Medicaid agency may establish special procedures for the purchase of medical devices or laboratory and X-ray tests (as defined in § 440.30 of this chapter) through a competitive bidding process or otherwise, if the State assures, in the certification required under § 431.51(d), and CMS finds, as follows: ( 1 ) Adequate services or devices are available to beneficiaries under the special procedures.
( 2 ) Laboratory services are furnished through laboratories that meet the following requirements: ( i ) They are independent laboratories, or inpatient or outpatient hospital laboratories that provide services for individuals who are not hospital patients, or physician laboratories that process at least 100 specimens for other physicians during any calendar year.
( ii ) They meet the requirements of subpart M of part 405 or part 482 of this chapter.
( iii ) Laboratories that require an interstate license under 42 CFR part 74 are licensed by CMS or receive an exemption from the licensing requirement by the College of American Pathologists. (Hospital and physician laboratories may participate in competitive bidding only with regard to services to non-hospital patients and other physicians' patients, respectively.)
( 3 ) Any laboratory from which a State purchases services under this section has no more than 75 percent of its charges based on services to Medicare beneficiaries and Medicaid beneficiaries.
( e ) *Lock-in of beneficiaries who over-utilize Medicaid services.* If a Medicaid agency finds that a beneficiary has utilized Medicaid services at a frequency or amount that is not medically necessary, as determined in accordance with utilization guidelines established by the State, the agency may restrict that beneficiary for a reasonable period of time to obtain Medicaid services from designated providers only. The agency may impose these restrictions only if the following conditions are met: ( 1 ) The agency gives the beneficiary notice and opportunity for a hearing (in accordance with procedures established by the agency) before imposing the restrictions.
( 2 ) The agency ensures that the beneficiary has reasonable access (taking into account geographic location and reasonable travel time) to Medicaid services of adequate quality.
( 3 ) The restrictions do not apply to emergency services furnished to the beneficiary.
( f ) *Lock-out of providers.* If a Medicaid agency finds that a Medicaid provider has abused the Medicaid program, the agency may restrict the provider, through suspension or otherwise, from participating in the program for a reasonable period of time. Before imposing any restriction, the agency must meet the following conditions: ( 1 ) Give the provider notice and opportunity for a hearing, in accordance with procedures established by the agency.
( 2 ) Find that in a significant number or proportion of cases, the provider has: ( i ) Furnished Medicaid services at a frequency or amount not medically necessary, as determined in accordance with utilization guidelines established by the agency; or
( ii ) Furnished Medicaid services of a quality that does not meet professionally recognized standards of health care.
( 3 ) Notify CMS and the general public of the restriction and its duration.
( 4 ) Ensure that the restrictions do not result in denying beneficiaries reasonable access (taking into account geographic location: and reasonable travel time) to Medicaid services of adequate quality, including emergency services.
( g ) *Targeted case management services.* The requirements of § 431.50(b) relating to the statewide operation of a State plan and § 440.240 of this chapter related to comparability of services do not apply with respect to targeted case management services defined in § 440.169 of this chapter.
( h ) *State plan home and community-based services.* The requirements of § 440.240 of this chapter related to comparability of services do not apply with respect to State plan home and community-based services defined in § 440.182 of this chapter.
[56 FR 8847, Mar. 1, 1991, as amended at 72 FR 68091, Dec. 4, 2007; 79 FR 3028, Jan. 16, 2014]