California Patient Trust Fund Bond: A Comprehensive Guide

December 23, 2021

California Patient Trust Fund Bond

This guide provides information for insurance agents to help their customers obtain a California Patient Trust Fund Bond

At a Glance:

  • Average Cost: Between 1% to 7.5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: Determined on a case by case basis (more on this later)
  • Who Needs it: California health facilities that hold patient funds in a trust account
  • Purpose: To ensure patients will receive compensation for any damages should the health facility mismanage their funds
  • Who Regulates Health Facilities in California: The California Department of Health and Human Services

Background

California Health and Safety Code 2-2 requires all health care facilities operating in the state to obtain a license with the Department of Health and Human Services. The California legislature enacted the licensing laws and regulations to ensure that health care facilities engage in ethical business practices. To provide financial security for the enforcement of the licensing law, health care facilities that hold patient funds in a trust account must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the California Patient Trust Fund Bond?

California requires all health care facilities that hold patient funds in a trust account to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that patients will receive compensation for financial harm if the health care facility fails to comply with the regulations set forth in California statute 1318. Specifically, the bond protects patients in the event the health care facility in any way mismanages patient funds. In short, the bond is a type of insurance that protects the public if the health facility acts unethically with patient funds.

California Patient Trust Fund Bond Form

California Patient Trust Fund Bond Form

How Can an Insurance Agent Obtain a California Patient Trust Fund Surety Bond?

BondExchange makes obtaining a California Patient Trust Fund surety bond easy. Simply log in to your account and use our keyword search to find the “trust fund” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

How is the Bond Amount Determined?

California statute 1318 dictates that the limit on all Patient Trust Fund bonds must be in an amount that reflects the total number of patient funds held in a trust account. Additionally, the statute specifies that the bond amount may not be less than $1,000.

Is a Credit Check Required for the California Patient Trust Fund Bond?

Surety companies will run a credit check on the owners of the health care facility to determine eligibility and pricing for the California Patient Trust Fund Bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.

How Much Does the California Patient Trust Fund Bond Cost?

The California Patient Trust Fund Bond can cost anywhere between 1% to 7.5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the bond cost on a $10,000 bond requirement.

$10,000 Health Care Facility Bond Cost

Credit Score Bond Cost (1 year)
800+ $100
625 – 799 $150
575 – 624 $366
550 – 574 $500
500 – 549 $750

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

Who is Required to Purchase the Bond?

California requires all health care facilities that handle over $25 in funds per patient, or $500 for all patients, in a one-month period to purchase a surety bond as a prerequisite to obtaining a business license. California statute 1250 defines a health care facility as any place that diagnoses, cares for, prevents, or treats human illness and where patients are admitted for a minimum of 24 hours.

How Do Health Care Facilities Apply For a License in California?

Health care facilities in California must navigate several steps to secure their licenses. Below are the general guidelines, but applicants should refer to the application form for details on the process.

License Period – All California Health Care Facility Licenses expire annually and must be renewed before the expiration date

Step 1 – Determine the License Classification

California requires health care facilities to obtain specific licenses corresponding to the type of facility that they operate. There are many different classifications of the California Health Care Facility License. For help determining their required classification, health care facilities should contact the Department of Public Health.

Step 2 – Complete the Application

Health care facilities can access the application forms specific to their license classification here. Health care facilities should mail their completed application forms, including all applicable fees, to the following address:

California Department of Public Health
Center for Health Care Quality
Licensing and Certification
Centralized Applications Branch
P.O. Box 997377, MS 3207
Sacramento, CA 95899-7377

General acute hospitals and acute psychiatric hospitals can complete their applications online here. The Department of Public Health will contact the applicant after have submitted their application to inform them of any additional requirements.

Step 3 – Purchase a Surety Bond

Applicants who hold patient funds in a trust account must purchase and maintain a surety bond, in an amount set by the Department of Health and Human Services, that reflects the total (estimated for first-time applicants) number of patient funds held. The bond may not be less than $1,000.

How Do California Health Care Facilities Renew Their License?

Prior to the license expiration date, the Department of Health and Human Services will send the applicant a renewal packet that must be mailed, along with all applicable fees, to the following address:

California Department of Public Health
Center for Health Care Quality
Licensing and Certification
Centralized Applications Branch
P.O. Box 997377, MS 3207
Sacramento, CA 95899-7377

All California Health Care Facility Licenses expire annually and must be renewed before the expiration date.

How Do California Health Care Facilities File Their Bond?

Health care facilities should mail their completed bond form, including the power of attorney, to the following address:

California Department of Public Health
Center for Health Care Quality
Licensing and Certification
Centralized Applications Branch
P.O. Box 997377, MS 3207
Sacramento, CA 95899-7377

The surety bond requires signatures from both the surety company that issues the bond and from an owner/officer of the health care facility. The surety company should include the following information on the bond form:

  • Legal name and address of entity/individual(s) buying the bond
  • Surety company’s name, address, and phone number
  • Bond amount
  • Date the bond goes into effect
  • Date the bond is signed

What Can California Health Care Facilities Do to Avoid Claims Against Their Bonds?

To avoid claims on their bond, health care facilities in California must ensure that they do not mismanage patient funds.

What Other Insurance Products Can Agents Offer Health Care Facilities in California?

Most reputable health care facilities will seek to obtain insurance coverage. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for California Health Care Facility Customers?

California conveniently provides a public database to search for licensed health care facilities in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2022-03-07T15:06:28-05:00