Nursing facilities must purchase a surety bond (or equivalent assurance approved by the Secretary) to protect all resident personal funds deposited with the facility, including refundable deposits—not just personal needs allowance funds. The bond must compensate residents or the state for losses due to negligence, incompetence, or dishonesty by facility staff; self-insurance and FDIC-insured bank accounts are not acceptable substitutes. The facility cannot be named as a beneficiary of the bond, and corporate-level bonds covering multiple facilities require separate state review to ensure all residents are protected.
View official sourceF570 (Rev. 173, Issued: 11-22-17, Effective: 11-28-17, Implementation: 11-28-17) §483.10(f)(10)(vi) Assurance of financial security. The facility must purchase a surety bond, or otherwise provide assurance satisfactory to the Secretary, to assure the security of all personal funds of residents deposited with the facility. DEFINITION §483.10(f)(10)(vi) “Surety bond” is an agreement between the principal (the facility), the surety (the insurance company), and the obligee (depending on State law, either the resident or the State acting on behalf of the resident), wherein the facility and the insurance company agree to compensate the resident (or the State on behalf of the resident) for any loss of residents’ funds that the facility holds, safeguards, manages, and accounts for. GUIDANCE §483.10(f)(10)(vi) The purpose of the surety bond is to guarantee that the facility will pay the resident (or the State on behalf of the resident) for losses occurring from any failure by the facility to hold, safeguard, manage, or account for the resident’s funds (for example, losses occurring as a result of acts or errors of negligence, incompetence, or dishonesty). The surety bond protects the resident or the State, not the facility, from loss. It differs from a fidelity bond, which covers no acts or errors of negligence, incompetence, or dishonesty. The surety bond is the commitment of the facility in an objective manner that the facility will hold, safeguard, manage and account for the personal funds residents have deposited with the facility. The facility assumes the responsibility to compensate the resident or the State for the amount of the loss up to the entire amount of the surety bond. The surety bond is not limited to personal needs allowance funds. Any resident funds that are entrusted to the facility for a resident must be covered by the surety bond, including refundable deposit fees. The facility cannot be named as a beneficiary. Self-insurance is not an acceptable alternative to a surety bond. Likewise, funds deposited in bank accounts protected by the Federal Deposit Insurance Corporation, or similar entity, also are not acceptable alternatives. PROCEDURES §483.10(f)(10)(vi) Through interviews with residents or their representative, determine if they were compensated for losses occurring from any failure by facility staff to hold, safeguard, manage, or account for the residents’ funds (for example, losses occurring as a result of acts or errors of negligence, incompetence, or dishonesty). If concerns arise based on these interviews, review the facility’s records to determine whether these concerns are substantiated. If the State survey agency determines that individual circumstances associated with a facility’s surety bond or its alternative are such that the survey agency cannot determine whether or not the facility is in compliance with these requirements, then it would be appropriate to make the referral to the State’s fiscal department. If a corporation has a surety bond that covers all of its facilities, there should be a separate review of the corporation’s surety bond by the appropriate State agency, such as the State’s fiscal department, to ensure that all the residents in the corporation’s facilities within that State are covered against any losses due to acts or errors by the corporation or any of its facilities. The focus of the review should be to ensure that if the corporation were to go bankrupt or otherwise cease to operate, the funds of the residents in the corporation’s facilities would be protected.