42 C.F.R. § 403.300 – Basis and purpose.

(a) Basis. This subpart implements section 1886(c) of the Act, which authorizes payment for Medicare inpatient hospital services in accordance with a State's reimbursement control system rather than under the Medicare reimbursement principles as described in CMS's regulations and instructions.
(b) Purpose. Contained in this subpart are—
1. (1) The basic requirements that a State reimbursement control system must meet in order to be approved by CMS;
2. (2) A description of CMS's review and evaluation procedures; and
3. (3) The conditions that apply if the system is approved.