Kentucky Nursing Home Bond: A Comprehensive Guide

March 2, 2022

Kentucky Nursing Home Bond

This guide provides information for insurance agents to help their customers obtain a Kentucky Nursing Home bond

At a Glance:

  • Average Cost: Between 0.75% to 5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: 1.25 times the average monthly balance of the facility’s resident trust account in the previous year or $10,000, whichever is greater
  • Who Needs it: All Kentucky nursing homes that manage residents’ funds and receive Medicaid payments
  • Purpose: To ensure that residents will receive compensation for financial harm if the nursing home acts unethically with their money
  • Who Regulates Nursing Homes in Kentucky: The Kentucky Cabinet for Health and Family Services

Background

907 KAR 1:022 requires all nursing homes that receive Medicaid payments to enroll with the Kentucky Cabinet for Health and Family Services. The Kentucky legislature enacted the enrollment requirement to ensure that eligible nursing homes receive compensation for services that are covered by Medicaid. To ensure residents are not taken advantage of, nursing homes that manage residents’ funds must purchase and maintain a surety bond to be eligible to receive Medicaid payments. Additionally, federal statute 483.10 requires all long-term care facilities that hold resident funds in a trust account to purchase a surety bond or other similar form of security. However, the federal regulation leaves the implementation and enforcement of this requirement to individual states.

What is the Purpose of the Kentucky Nursing Home Bond?

Kentucky requires each nursing home that manages resident funds to purchase a surety bond before enrolling as a Medicaid provider. The bond ensures that residents will receive compensation for financial harm if the nursing home fails to abide by the regulations outlined in federal statute 483.10. Specifically, the bond protects residents if the nursing home in any way mismanages their funds. In short, the bond is a type of insurance that protects residents if the nursing home acts unethically with their money.

Kentucky Nursing Home Bond Form

Kentucky Nursing Home Bond Form

How Can an Insurance Agent Obtain a Kentucky Nursing Home Surety Bond?

BondExchange makes obtaining a Kentucky Nursing Home bond easy. Simply log in to your account and use our keyword search to find the “nursing home” 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.

Is a Credit Check Required for the Kentucky Nursing Home Bond?

Surety companies will run a credit check on the owners of the nursing home to determine eligibility and pricing for the Kentucky Nursing Home 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 Kentucky Nursing Home Bond Cost?

The Kentucky Nursing Home bond can cost anywhere between 0.75% to 5% of the bond amount per year. Insurance companies determine the rate based on several factors including your customer’s credit score and experience. The chart below offers a quick reference for the bond cost on a $20,000 bond requirement.

$20,000 Nursing Home Bond Cost

Credit Score Bond Cost (1 year)
800+ $150
625 – 799 $200
600 – 624 $500
575 – 599 $600
500 – 574 $1,000

Who is Required to Purchase the Bond?

Kentucky requires nursing homes that manage resident funds to purchase a surety bond as a prerequisite to enrolling as Medicaid providers. To paraphrase 902 KAR 20:048, a nursing home is a facility that provides continuing nursing and medical services to residents that do not require hospitalization.

How do Kentucky Nursing Homes Become Medicaid Providers?

Nursing homes in Kentucky must navigate several steps to become enrolled as Medicaid providers. Below are the general guidelines, but applicants should refer to the enrollment instructions for details on the process.

Step 1 – Obtain a Business License

Nursing homes must obtain a business license through the Cabinet for Health and Family Services before enrolling as a Medicaid provider. To obtain a business license, nursing homes must:

1.a Apply for a Certificate of Need (CON) which authorizes the construction, renovation, or expansion of the facility. All CON applications should be emailed to [email protected] or mailed to the following address:

Cabinet for Health and Family Services
Office of Inspector General
Division of Certificate of Need
275 East Main Street 5E-A
Frankfort, KY 40621

Nursing homes must pay a CON application fee corresponding to the project’s proposed capital expenditure, as referenced in the below table.

Capital Expenditure Application Fee
$0 – $200,000 $1,000
Over $200,000 to $5 million 0.5% of the capital expenditure rounded to the nearest dollar
Over $5 million $25,00

1.b Mail a completed license application, including all required fees, to the Office of the Inspector General (OIG) at:

Office of Inspector General
275 East Main Street 5E-A
Frankfort, Kentucky 40621

The OIG will conduct an on-site inspection of the facility before issuing a license.

Step 2 – Purchase a Surety Bond

Nursing homes that manage resident funds and receive Medicaid reimbursements must purchase and maintain a surety bond in an amount that is 1.25 times the average monthly balance of the facility’s resident trust account in the previous year or $10,000, whichever is greater

Step 3 – Enroll as a Medicaid Provider

Nursing homes are eligible to enroll as Medicaid providers after obtaining their CON and business license. To enroll as Medicaid providers, nursing homes must:

3.a Register with the NPPES and obtain a National Provider Identifier (NPI) and taxonomy code

3.b Submit an enrollment application electronically through the KY MPPA website. Nursing homes must complete the application in its entirety, and submit the following items:

    • Their nursing facility license
    • Bed verification letter (only required if the facility’s bed data is not listed on their license)
    • Clinical Laboratory Improvement Amendments (CLIA) certificate
    • IRS letter of verification of FEIN
    • Verification of bank routing/account numbers (only required if enrolling in direct deposit)
    • The required application fee

Nursing homes must have a minimum of 10 continuous beds to be eligible for enrollment.

How do Kentucky Nursing Homes Renew Their Licenses and Medicaid Enrollments?

Nursing homes will receive instructions on how to renew their licenses prior to the expiration date. All Kentucky Nursing Home Licenses expire annually and must be renewed before the expiration date. Nursing homes can revalidate their provider enrollments electronically through the KY MPPA website and must do so at least once every 5 years. Additionally, nursing homes must obtain a Commission Accreditation Rehabilitation Facility (CARF) certification after their first year.

What are the Insurance Requirements for Nursing Homes in Kentucky?

Kentucky does not require nursing homes to obtain any form of liability insurance as a prerequisite to obtaining a business license or enrolling as a Medicaid provider. Nursing homes that manage resident funds and receive Medicaid reimbursements must purchase and maintain a surety bond in an amount that is 1.25 times the average monthly balance of the facility’s resident trust account in the previous year or $10,000, whichever is greater.

How Do Kentucky Nursing Homes File Their Bond?

Nursing homes should mail their completed bond form, including the power of attorney, to the following address:

Department for Medicaid Services
275 E. Main St. 3W-A
Frankfort, KY 40621

The surety bond requires signatures from both the surety company that issues the bond and from a representative of the nursing home. 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 and state of incorporation
  • Bond amount
  • Date the bond goes into effect
  • Date the bond is signed

What Can Kentucky Nursing Homes Do to Avoid Claims Against Their Bonds?

To avoid claims on their bonds, nursing homes in Kentucky must ensure that they:

  • Hold all resident funds in a designated trust account
  • Administer all resident funds in a lawful manner
  • Accurately report on all resident funds
  • Refund all resident funds upon the termination of a deposit

What Other Insurance Products Can Agents Offer Nursing Homes in Kentucky?

Kentucky does not require nursing homes to purchase any form of liability insurance as a prerequisite to obtaining a business license or Medicaid provider enrollment. However, most reputable businesses will seek to purchase this insurance anyway. 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 Kentucky Nursing Home Customers?

Kentucky conveniently provides a public database to search for active nursing homes 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.

2022-03-23T16:37:26-04:00