The department shall deny payment under AS 47.07 or AS 47.25.120 — 47.25.300 to a nursing facility (1) that is not in compliance, and, for the preceding three months, has not been in compliance, with the requirements of 42 U.S.C. 1396r (Title XIX of the Social Security Act, as amended), and regulations adopted under that statute, until correction of the deficiency; or
(2) if the department finds, on three consecutive reviews, that the nursing facility provided substandard quality of care; the department shall deny payment under this paragraph for new admissions until the facility has demonstrated to the satisfaction of the department that it is in compliance with the Medicaid requirements of 42 U.S.C. 1396r, and that it will remain in compliance with the requirements.