4 Strategies to Recover from Revenue Reduction or Rising Costs at Your AFC

It started with an email.

Just a few words—“rate realignment,” “funding reductions,” “new contract coming soon”—but enough to send a wave of anxiety through the heart of our operation.

In the days that followed, sleep became scarce.
The questions came like clockwork at 2 a.m.:

How much will they cut?
Can we stay open?
Do I have to let staff go—people who’ve cared for our residents like family?
Will we have to discharge residents who finally found a place to call home?

Then came the answer:
A 5% rate cut. And a reduction in enhanced staff pay.

For adult foster care homes already operating at razor-thin margins, it felt like the ground gave way. At a 6-bed AFC home with a 1:6 staffing ratio, many owners report needing at least $317,000 annually to stay afloat. That 5%? It slashes about $16,000 from the budget—with no change in staffing requirements and rising operating expenses.

You Don’t Need to Panic—You Have Options

Refuse to accept that layoffs or discharges are the only answer. Whether you’re running a licensed Adult Foster Care Community, a group home for adults with disabilities, or an assisted living facility, here are four strategic actions to stabilize your AFC business and continue providing quality care.

🛠️ Step 1: Evaluate Expenses with Staff Input for Waste

Your staff see what you don’t.
This is the first and most practical way to protect your licensed adult foster home from financial collapse. We asked our team:

“Where can we save $500 without impacting care?”

They noticed:

Lights left on in unused rooms
Disposable items used when reusables would work
Over-purchased groceries and supplies
Unused subscriptions and services
Decorations or gifts that weren’t necessary

This is more than just a cost-cutting strategy—it’s a morale builder and a leadership move. Adult foster home providers can gain loyalty and fresh insights by including staff in the solution.

💡 Savings Target: $5,000–$7,000 annually
Keyword insight: Care Provider Solutions recommends this step to all AFC system specialists managing residential care facilities.

🌱 Step 2: Transition Eligible Residents to Medicaid Waiver Programs

Some residents receiving CMH funding may qualify for Nursing Facility Level of Care, opening the door to Medicaid waiver programs such as:

MI Choice Waiver
Habilitation Supports Waiver (HSW)

These programs often provide higher reimbursement rates and may cover:

Medical supplies
Transportation
Behavioral therapy or day programs
Additional case management support

⏳ While it may take 30–90 days, this move can dramatically improve your cash flow.

This is a must-know for AFC home providers navigating the financial side of care delivery.

🤝 Step 3: Ask CMHs Where They Need Help—Then Fill the Gap

Reach out to your Community Mental Health (CMH) partners and ask:

“What needs are going unmet right now?”

Opportunities might include:

Respite care
Emergency or crisis stabilization placements
Temporary housing for behavioral health clients

By positioning your adult foster care company as a solution partner, not just a care provider, you create additional income streams—often at higher rates.

This step is especially relevant for adult foster care consultants, senior care business owners, and anyone building a sustainable home and community-based setting (HCBS) model.

🔄 Step 4: Adjust Without Sacrificing Staffing

Instead of laying off staff or reducing your caregiver-to-resident ratio, tighten operations in areas like:

Food and entertainment budgets
Energy and utility use
Temporarily deferring a portion of owner or admin pay
Pausing non-required services and subscriptions

These adjustments protect your most valuable asset: your team. In residential assisted living, consistency and trust are everything.

💬 Final Thoughts: You’re Not Alone in This

You didn’t start your AFC home business to get rich.
You started it to care. To give adults—especially those with disabilities—a safe, supportive place to live with dignity.

Yes, the funding may fall short.
But your mission still matters—and so does your leadership as a care planner or provider.

This isn’t the end. It’s the start of a more connected, more sustainable chapter.

✅ Need Support? We’ve Got You.

Want more ideas like these? Want a community of adult foster care providers who get it?

Join our AFC Mastermind Membership—where mentoring, consulting, and real-life problem solving come together.

👉 Your first month is just $1. Use Coupon Code: TRIAL

Stay connected
Stay sustainable
Stay in business

🔗 Learn more here

You can also stay up to date on new content Care Provider Solutions, mentoring for adult foster care providers, has published here: