(a) Individuals needing NF services. If the State mental health or intellectual disability authority determines that a resident or applicant for admission to a NF requires a NF level of services, the NF may admit or retain the individual.

(b) Individuals needing NF services and specialized services. If the State mental health or intellectual disability authority determines that a resident or applicant for admission requires both a NF level of services and specialized services for the mental illness or intellectual disability—

(1) The NF may admit or retain the individual; and

(2) The State must provide or arrange for the provision of the specialized services needed by the individual while he or she resides in the NF.