Unlicensed Works Only with Certain Priorities


Group homes continue to serve the community well.  They house and provide rather specialized care for adults and children with very serious vulnerabilities.  This includes the medically fragile elderly and those recovering from or managing the aftermath of serious auto accidents.

In many states a license is required, including the state of my birth, Michigan.  Licensing requires the development of regulatory compliant policies that govern care, personnel relations, prohibited staff actions, medication management, ongoing training and staff development, fire safety, process for recording and reporting incidents, assessing resident needs and more.

Some have developed homes that render quality services to adults and children without a license.  While in some instances there could be disadvantages others are finding this arrangement offers greater opportunity.  First to the disadvantages:

  1. In some locations, contracts with agents that disperse Medicaid funds via waivers will not contract with an unlicensed home unless the owner actually lives there with the residents being cared for.  These homes are often designated as adult family care homes and there are licensed models known as adult foster care family homes.
  2. Depending upon the specific needs of the residents you care to serve, some states insist upon a license based upon resident needs and types
  3. Some liability insurance carriers have preferred not to write polices for unlicensed models and there have been reports of higher premiums for unlicensed homes, although this appears not widespread and can be hard to verify with real detail.
  4. National referral services (if you care to even deal with them) may not contract with an unlicensed home.
  5. An owner who does not respect the value of a degree of governance may run a home without certain protocols and best practices.  As a result resident care and safety can be jeopardized.


Disadvantages aside, this does not mean that unlicensed homes cannot function for the good of the community.   When properly organized and supervised by quality professionals services can be rendered in a highly effective and responsible way.  Generally owners use very similar practices and forms that licensed homes are required to use and create a well-managed environment.  It is important that owners understand there are obligations associated with this model.

First in many jurisdictions there must be a separation in corporate ownership.  The entity providing the room and board cannot be the same that employs those who are rendering care.  Their respective boards of directors, membership committees, etc. often cannot be one and the same.

This will require a separate staffing agency who can provide training, staff development, etc.  Then the group home owner pays the staffing company on a pre-established payroll schedule and the staffing company in turn pays the staff or in some instances bills residents directly.

State published administrative rules may also require that each resident and/or their designated representative sign a lease for the space they use which clearly separates responsibilities between two, (2) agencies.  This may be among the major tools that makes it obvious your mode of operation does not require licensure.  It may also impact who checks are made payable to for room and board and personal care.


Those preferring to be unlicensed will want to ensure you are doing so for the right reasons.  If the thought of state oversight is simply distasteful then you have to be careful.  You could send a signal to those you employ that authority  and standards do not matter.  You also do not want to make such a decision just because a licensing rep was a real knucklehead the last time you met.  Then you are playing personalities and that is an unending and ultimately self-defeating approach to business relationships.

So every entrepreneur has to decide which route to take.  Just be sure you are strategic and have the right leadership in developing a competent, accountable, unlicensed model.

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