Tennessee Nursing Home Bond: A Comprehensive Guide

February 14, 2022

Tennessee Nursing Home Bond

This guide provides information for insurance agents to help their customers obtain a Tennessee 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: Greater than or equal to all resident funds held by the facility at any given time
  • Who Needs it: All nursing homes operating in Tennessee
  • 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 Tennessee: The Tennessee Department of Health

Background

Tennesee statute 1200-08-06.02 requires all nursing homes operating in the state to obtain a license with the Department of Health. The Tennessee legislature enacted the licensing laws and regulations to ensure that nursing homes engage in ethical business practices. To provide financial security for the enforcement of the licensing law, nursing homes must purchase and maintain a surety bond to be eligible for licensure. Additionally, federal statute 483.10 requires all long-term care facilities that manage resident funds 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 Tennessee Nursing Home Bond?

Tennessee requires nursing homes to purchase a surety bond as a prerequisite to obtaining a business license. The bond ensures that residents will receive compensation for financial harm if the facility fails to abide by the regulations outlined in Tennessee statute 68-11-906. Specifically, the bond protects residents if the nursing home fails to properly account for or handle their funds. In short, the bond is a type of insurance that protects residents if the nursing home acts unethically with their money.

Tennessee Nursing Home Bond Form

Tennessee Nursing Home Bond Form

How Can an Insurance Agent Obtain a Tennessee Nursing Home Bond?

BondExchange makes obtaining a Tennessee Nursing Home bond easy. Simply log in to your account and use our keyword search to find the “long term care” 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 Tennessee Nursing Home Bond?

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

The Tennessee 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

*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?

Tennessee requires all nursing homes operating in the state to purchase a surety bond as a prerequisite to obtaining a business license. To paraphrase Tennessee statute 68-11-201, a nursing home is a facility that provides 24-hour skilled nursing care to residents that are not ill enough to require hospitalization.

How Do Nursing Homes Apply for a License in Tennessee?

Nursing homes in Tennessee must navigate several steps to obtain a business license. Below are the general guidelines, but applicants should refer to the licensing statutes for details on the process.

License Period – All Tennesee Nursing Home Licenses expire one year from the date of issuance and must be renewed before the expiration date

Step 1 – Obtain a Certificate of Need

Nursing homes in Tennessee are required to obtain a Certificate of Need (CON) from the Health Services and Development Agency prior to applying for a business license. A CON is essentially a permit that grants the nursing home permission to apply for licensure. Nursing homes must complete the following steps to obtain a CON:

1.a Email a letter of intent to apply for a CON to [email protected] between the 1st through the 15th of the month

1.b Publish the information contained within the letter of intent in the local newspaper of the community where the facility will be located for the same 15 day period

1.c Mail or deliver a completed CON application form to the following address:

Health Services and Development Agency
Andrew Jackson Building, 9th Floor, 502 Deaderick Street
Nashville, TN 37243

The Health Services and Development Agency will begin the CON review process after receiving the nursing home’s application. The nursing home must present evidence that their facility complies with all requirements in a public hearing where advocates and critics may also argue for or against the facility obtaining a CON.

Nursing homes should utilize the application instructions for help navigating the application process. Additionally, all required application forms can be found here.

Step 2 – Purchase a Surety Bond

Nursing facilities must purchase and maintain a surety bond in an amount that is greater than or equal to all resident funds held by the facility at any given time

Step 3 – Complete the Application

All Tennessee Nursing Home License applications (new facility or change of ownership) should be mailed to the following address:

Office of Health Care Facilities
665 Mainstream Drive, Second Floor
Nashville, TN 37228-1254

Nursing homes must complete the application in its entirety, submit all required documents, and pay a licensing fee based on the facility’s total number of beds as illustrated in the below table.

Credit Score Bond Cost (1 year)
Less than 25 $1,040
25 – 49 $1,300
50 – 74 $1,560
75 – 99 $1,820
100 – 124 $2,080
125 – 149 $2,340
150 – 174 $2,600
175 – 199 $2,860

All nursing home license applications must be signed by a licensed notary.

How do Tennessee Nursing Homes Renew Their License?

Nursing homes should mail their completed renewal application to the following address:

Health Services and Development Agency
Andrew Jackson Building, 9th Floor, 502 Deaderick Street
Nashville, TN 37243

All Tennesee Nursing Home Licenses expire one year from the date of issuance and must be renewed before the expiration date.

What are the Insurance Requirements for Nursing Homes in Tennessee?

Tennessee does not require nursing homes to obtain any form of liability insurance as a prerequisite to obtaining a business license. Nursing homes must purchase and maintain a surety bond.

How Do Tennessee Nursing Homes File Their Bond?

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

Health Services and Development Agency
Andrew Jackson Building, 9th Floor, 502 Deaderick Street
Nashville, TN 37243

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 of entity/individual(s) buying the bond
  • Surety company’s name and state of incorporation
  • Bond amount
  • Date the bond is signed

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

To avoid claims made against their bonds, nursing homes in Tennesee must ensure they:

  • Hold all residents funds of $100 or more in an interest-bearing account that is insured by the federal government
  • Maintain a purely fiduciary interest in the funds
  • Properly account for all funds
  • Issue accurate reports on all resident funds

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

Tennessee does not require nursing homes to purchase any form of liability insurance as a prerequisite to obtaining a business license. However, most reputable businesses will seek to obtain 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 Tennessee Nursing Home Customers?

Tennesee 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.

2022-03-16T17:46:31-04:00