(a) A hospital is eligible for payment under the Medical Assistance Program under the following conditions:

1. (1) The hospital has a valid operating certificate issued by the Office of Mental Health, in accordance with Part 582 of this Title.
2. (2) The hospital complies with applicable requirements of title XIX of the Social Security Act, as identified in section 502.2(c) of this Title and regulations, as identified in section 502.2(d) of this Title, promulgated thereunder.

(c) The hospital is eligible for payment for each patient day at the per diem rate established pursuant to the provisions of Part 577 of this Title.

1. (1) Payment for alternate level of care services. Payment for alternate level of care services will be made in accordance with subdivision (c) of this section, unless there is a significant excess of operational beds at the hospital or at hospitals in the Office of Mental Health region in which the hospital is located. If a significant excess exists in the hospital or in the region, payment for alternate level of care services will be made at the statewide average skilled nursing facility or health-related facility rate, as appropriate, weighted by total patient days, at the time the alternate level of care services are furnished.

2. (2) Significant excess of operational beds. A significant excess of operational beds exists at a hospital if the hospital's base year occupancy rate, excluding alternate level of care days, is less than 80 percent, as stated on the operating certificate issued by the Office of Mental Health. A significant excess of operational beds exists at hospitals in an Office of Mental Health region if the overall occupancy rate for hospitals in the region is less than 80 percent. The commissioner may determine that no excess exists if, within 30 days following notice to the hospital by the commissioner of the hospital's base year occupancy rate, the hospital demonstrates to the satisfaction of the commissioner:

   1. (i) the occupancy rate for the year following the base year, excluding alternate level of care days, was not less than 80 percent of the certified bed capacity in that year;
   2. (ii) the hospital has reduced or has applied to reduce its certified bed capacity by the number of beds necessary to reach an occupancy rate of 80 percent, excluding alternate level of care days, in the base year; or

   3. (iii) the occupancy rate of 80 percent may be reached by reducing certified bed capacity by no more than three beds or one percent of total certified bed capacity.

      The commissioner may determine that no excess exists if, within 30 days following the close of the calendar quarter during which the alternate level of care services were furnished, the hospital demonstrates to the satisfaction of the commissioner that the occupancy rate during that quarter, excluding alternate level of care days, was not less than 80 percent of the certified bed capacity in that quarter.

3. (3) Procedure for determining occupancy rates. The commissioner will notify each hospital of its base year occupancy rate at the time the hospital is notified of its certified rate in accordance with Part 577 of this Title. After the expiration of the 30-day period described in paragraph (2) of this subdivision, the commissioner will notify each hospital whether a significant excess of operational beds exists at the hospital and at hospitals in the Office of Mental Health region in which the hospital is located.

(d)