42 CFR 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.
(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.
(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.