Last updated 2026-07-26
TL;DR
An elderly care company is any business providing paid senior care, from home care agencies to licensed facilities. Assisted living facilities and residential care homes are licensed housing models offering help with daily activities but not skilled nursing. Median assisted living cost was $5,900/month in 2024 (Genworth). Medicare doesn't pay for room and board; Medicaid may help through state waiver programs.
What is assisted living?
Assisted living is a licensed residential option for older adults or adults with disabilities who need help with daily activities like bathing, dressing, medication management, and meals, but who don't need the round-the-clock skilled nursing you'd find in a nursing home. Residents typically have their own room or apartment, get three meals a day, and have staff on site to help as needed. The exact rules vary by state because assisted living is regulated at the state level, not federally. There's no single federal definition. The Centers for Medicare & Medicaid Services (CMS) doesn't license or directly oversee assisted living facilities the way it does nursing homes under federal nursing home reform law [1]. Instead, each state's health or social services department writes its own licensing category, sometimes called "assisted living," sometimes "residential care facility," "personal care home," or "adult care home." What's consistent across states is the basic model: a non-medical, home-like setting with support services layered in. Staff help residents get through the day. They don't provide hospital-level medical care.
What is a group home?
A group home is a small residential setting, usually a single house, where a handful of unrelated residents live together and get support from paid staff. Group homes serve different populations depending on the state and the license type: seniors, adults with intellectual or developmental disabilities (IDD), people in mental health recovery, or youth in foster care systems. The term "group home" is used loosely by the public but means something specific to state regulators. In most states, a group home for adults with disabilities is licensed differently than an assisted living facility for seniors, even though the buildings can look identical from the curb. Staffing ratios, resident capacity, and required training differ by population served, more than by building size. Many states cap group homes at 6 to 8 residents to preserve a home-like environment, though this varies. If you're researching how these licenses differ across models, our guide on assisted living facilities breaks down how states categorize residential care by population and size.
What is an assisted living facility (and how is it different from a residential care home)?
An assisted living facility (ALF) is the licensed building and program itself, the physical structure plus the state license that allows it to house residents and provide personal care services. "Residential care home" is often used interchangeably with assisted living, but in many states it specifically refers to smaller, home-based settings (sometimes 4 to 10 beds) as opposed to larger, apartment-style assisted living communities that might house 50 to 150 residents. Here's the practical distinction that matters for someone starting a business: size and scale change your regulatory category. A small residential care home operating out of a single-family house often falls under a different license tier, with different staffing ratios, fire code requirements, and inspection frequency, than a large assisted living community built from the ground up as a commercial facility. Both models are licensed by the state agency responsible for long-term care, usually the same department that licenses nursing homes, though under a different chapter of the state code. Always confirm the exact terminology and license tier with your state licensing agency before drafting a business plan, because "assisted living" in one state might require a completely different application than "residential care home" in a neighboring state.
What does assisted living provide?
Assisted living typically provides help with what's called activities of daily living (ADLs): bathing, dressing, toileting, transferring (getting in and out of bed or a chair), and eating. Most facilities also provide medication management or reminders, three meals a day, housekeeping, laundry, transportation to appointments, and social or recreational activities. What assisted living does not typically provide is skilled nursing care. That means IV therapy, wound care beyond basic first aid, ventilator support, or the kind of 24/7 physician-directed medical care found in a nursing home, are usually outside an assisted living facility's scope of license. Some states allow assisted living communities to have a higher "enhanced" or "limited nursing" tier that permits more medical services, but that's a distinct license category with its own staffing rules. A quick way to think about it: assisted living supports independence with a safety net. Nursing homes provide ongoing medical treatment. If a resident's needs escalate past what the assisted living license allows, most states require the facility to either get a waiver, bring in outside home health services, or help the resident transition to a higher level of care.
What is the difference between assisted living and a nursing home?
| Regulation | State-licensed | Federally regulated (42 CFR 483) + state-licensed | |
|---|---|---|---|
| Nursing staff | Not required 24/7 in most states | RN required to be available; licensed nurse on duty 24/7 | |
| Typical resident | Needs help with ADLs, medically stable | Needs ongoing skilled nursing or rehab | |
| Median monthly cost (2024) | $5,900 | $10,646 (private room) | |
| Medicare coverage | Room/board not covered | Short-term skilled stays may be covered | Source: Genworth 2024 Cost of Care Survey [2]; CMS 42 CFR Part 483 [1] |
The core difference is medical intensity. Nursing homes (also called skilled nursing facilities) provide 24-hour licensed nursing care and are built for residents who need ongoing medical treatment, rehabilitation after surgery or a hospital stay, or management of complex chronic conditions. Assisted living is for people who need help with daily tasks but are largely medically stable. Nursing homes are regulated under federal law (42 CFR Part 483) because they participate in Medicare and Medicaid, which means they're subject to federal quality-of-care standards, mandatory RN coverage, and regular federal-state survey inspections [1]. Assisted living facilities are licensed purely at the state level; there is no equivalent federal oversight structure. Cost tends to run higher for nursing homes because of the higher staffing ratios and medical equipment involved. According to Genworth's 2024 Cost of Care Survey, the median monthly cost for a private room in a nursing home was $10,646, compared to $5,900 for assisted living [2]. Below is a side-by-side comparison. | Feature | Assisted living | Nursing home |
Does Medicare cover assisted living facilities?
No. Medicare does not cover the cost of room and board at an assisted living facility. Medicare.gov states plainly that Medicare does not pay for "custodial care" (help with daily activities like bathing and dressing) "if that's the only care you need" [3]. Assisted living is, by definition, mostly custodial care, so it falls outside Medicare's coverage. Medicare Part A may cover a short-term stay in a skilled nursing facility after a qualifying hospital stay, but that's a different setting and a different purpose (rehabilitation, not long-term residential living) [4]. Medicare Advantage plans have gained some flexibility since 2019 to offer limited non-medical supplemental benefits, like some home modifications or personal care hours, but that's still not the same as paying assisted living rent [5]. Medicaid is a different story. Every state Medicaid program is required to cover nursing facility services for eligible individuals, but assisted living coverage works differently: most states use a Home and Community-Based Services (HCBS) waiver, authorized under Section 1915(c) of the Social Security Act, to pay for personal care services within an assisted living setting . Medicaid still generally won't pay for the room and board portion of assisted living, only the care services, so residents or their families typically cover rent separately, sometimes with help from Supplemental Security Income (SSI) or state supplemental payments. Eligibility, waiver availability, and covered services vary significantly by state, so confirm current waiver programs and income limits with your state Medicaid agency.
How to start a group home (or assisted living / residential care business)
Starting a group home or residential care home is a licensing project before it's anything else. You're more than opening a business, you're applying to operate a regulated care setting, and every state has its own process, application forms, and fee schedule. Here's the general sequence most states follow, though the order and requirements vary: 1. Pick your population and license type. Decide whether you're serving seniors, adults with IDD, mental health recovery populations, or another group, since this determines which state agency and license category applies to you. 2. Check zoning and property requirements. Most residential care homes need to be in a zone that allows a "community residential facility" or similar use, and many states require compliance with the Fair Housing Act's protections for group homes in residential zones . Building and fire code compliance (sometimes requiring a fire marshal inspection and sprinkler system) is usually mandatory before licensing. 3. Write your policies and procedures manual. States typically require documented policies covering medication management, emergency procedures, resident rights, admission and discharge criteria, and staff training before they'll issue a license. 4. Develop a staffing plan. You'll need to show minimum staff-to-resident ratios (which vary by state and by resident acuity level), background check compliance, and required training hours for direct care staff. 5. Submit your license application and pay fees. Application fees range widely, commonly in the low hundreds to low thousands of dollars depending on the state and facility size; confirm exact fees with your state licensing agency. 6. Pass a pre-licensing inspection. A state surveyor will inspect the physical property, review your policies, and check staff files before granting a license. Because every state's application packet, forms, and required attachments differ, building your own paperwork from scratch state by state is one of the slowest parts of this process. That's the gap our $299 State Group Home Licensing Kit is built to close: state-specific application checklists and policy templates so you're not starting from a blank page. It doesn't replace your state's actual review or guarantee approval, but it does save you from reinventing the policy manual and staffing plan from zero.
How do I start a group home if I've never run a care business before?
If you've never operated a licensed care facility, start by contacting your state's licensing agency directly and asking for the specific regulation chapter that governs your intended population (senior, IDD, mental health, etc.) before you sign a lease or buy property. Many states also require an orientation session or pre-application meeting, and skipping that step is a common reason first-time applicants get bounced back for corrections. Most states also require an administrator or operator to complete a specific training course or hold a credential (sometimes a state-issued Assisted Living Administrator license, sometimes a shorter certification) before the facility can be licensed. This requirement catches a lot of first-timers off guard because it can take weeks to months to complete depending on the state's course schedule. Realistically, plan for a 4 to 12 month runway from "I want to do this" to "I have residents," covering zoning approval, property prep, staffing plan development, application review, and inspection. States with high application volume or short-staffed licensing offices can run longer. Nobody publishes a reliable national average processing time because it varies so much by state and by how complete your initial application is; the honest answer is to ask your state licensing office for their current average turnaround when you file.
What license category do I need: senior assisted living, IDD group home, or mental health residential?
This depends entirely on who you plan to serve, and picking the wrong category early is one of the most expensive mistakes new operators make. A building licensed for senior assisted living usually can't simply pivot to serving adults with IDD or mental health populations without a new license application, different staff training, and sometimes different physical plant requirements. Senior-focused licenses (assisted living, residential care for the elderly, adult foster care depending on the state) generally emphasize ADL support, medication management, and fall prevention. IDD group home licenses often require staff trained in behavior support plans and person-centered planning under standards tied to Medicaid HCBS waiver requirements . Mental health residential licenses frequently require staff trained in crisis de-escalation and coordination with community mental health providers. If you're not sure which category fits your plan, our guides on assisted living and facility assisted living licensing walk through how states draw these lines, and your state licensing agency's website will list the specific chapter numbers for each population category.
How much does it cost to start and run a residential care home?
Start-up costs vary enormously depending on whether you're buying or leasing a home, renovating for accessibility and fire code compliance, and how many licensing and inspection fees your state charges. There's no single honest national figure here; costs that get quoted online (often "$50,000 to $200,000" type ranges) are typically estimates from industry blogs, not government sources, so treat them as rough planning ranges, not guarantees. What you can budget with more confidence is the licensing fee itself, which most states publish on their licensing agency's website, often ranging from under $100 for a small home-based license renewal to several thousand dollars for a large facility's initial application. Ongoing costs include annual license renewal, staff wages and training, food, utilities, liability insurance, and inspection-related corrections if any come up. On the revenue side, families and residents are generally paying out of pocket, through long-term care insurance, or through Medicaid waiver reimbursement rates set by the state, which also vary widely. Because both costs and payment rates are so state- and market-specific, the only reliable way to build a real budget is to pull your state's current fee schedule and your state Medicaid agency's current HCBS waiver reimbursement rate sheet before finalizing a business plan.
What inspections and ongoing compliance should I expect after licensing?
Once licensed, residential care homes and assisted living facilities are subject to periodic inspections, sometimes annual, sometimes more frequent depending on the state and any past violations. Inspectors typically review resident records, medication logs, staff training files, incident reports, and the physical condition of the building, including fire safety equipment. Most states also require operators to report specific incidents (falls with injury, medication errors, abuse or neglect allegations, deaths) within a set number of hours or days, and failing to report on time can trigger its own citation separate from the underlying incident. Building a simple internal incident-reporting system before you open, rather than scrambling to create one after your first inspection, saves a lot of stress. Complaint-triggered inspections are also common: if a family member or staff member files a complaint with the state, an inspector can show up unannounced regardless of your regular inspection schedule. Keeping your policy manual, staff files, and medication logs audit-ready at all times, more than before a scheduled visit, is the difference between a routine inspection and a stressful one.
Where do I go from here?
If you're still deciding between building a large assisted living community, a small residential care home, or a specialized group home for a specific population, start by reading how your state defines each category, since the terminology genuinely differs state to state and drives everything downstream: zoning, staffing ratios, and fee schedules. From there, the practical next steps are: confirm your license category and agency, check zoning for your target property, draft your policy and procedures manual, and build a staffing plan that matches your state's minimum ratios. Our guides on senior assisted living facilities near me and assisted living at home cover related models if you're weighing smaller-scale or in-home alternatives before committing to a full facility license. If you want a head start on the paperwork itself rather than building every form and policy from a blank document, our $299 State Group Home Licensing Kit gives you state-specific checklists and policy templates to work from. It's a starting point for your own state's application, not a substitute for your state licensing agency's actual review, and it doesn't guarantee approval or any particular timeline.
Frequently asked questions
What is assisted living in simple terms?
Assisted living is a licensed residential setting where people who need help with daily activities like bathing, dressing, or medication management can live with staff support available, without the round-the-clock medical care of a nursing home. It's regulated state by state, so exact services and rules vary depending on where the facility is located.
What is a group home?
A group home is a small residential setting, often a single house, where a small number of unrelated residents live together with paid staff support. Group homes can serve seniors, adults with intellectual or developmental disabilities, or people in mental health recovery, and licensing requirements differ by which population the home serves.
What is an assisted living facility?
An assisted living facility is the licensed building and program that provides housing plus personal care services (help with daily activities, meals, medication reminders) to residents who don't need full-time skilled nursing care. States license these facilities individually, so the exact definition and required services vary by state law.
What does assisted living provide day to day?
Assisted living typically provides help with bathing, dressing, mobility, and medication management, plus meals, housekeeping, laundry, transportation, and social activities. It does not typically include skilled nursing services like wound care or IV therapy, though some states allow an enhanced license tier that permits more medical support.
What is the difference between assisted living and a nursing home?
Assisted living serves people who need help with daily tasks but are medically stable, while nursing homes provide 24-hour skilled nursing care for residents with ongoing medical needs. Nursing homes are federally regulated under 42 CFR Part 483; assisted living is regulated only at the state level, with no federal oversight equivalent.
Does Medicare cover assisted living facilities?
No. Medicare does not cover room and board at assisted living facilities because that's considered custodial care, not medical care. Medicare may cover a short-term skilled nursing facility stay after a qualifying hospital admission, but that's a different care setting entirely, not ongoing assisted living residency.
Does Medicaid pay for assisted living?
Medicaid generally doesn't pay for assisted living room and board, but many states use Home and Community-Based Services (HCBS) waivers under Section 1915(c) of the Social Security Act to cover personal care services delivered within an assisted living setting. Eligibility and covered services vary by state, so confirm with your state Medicaid agency.
How do I start a group home?
Start by identifying which population you want to serve and contacting your state's licensing agency to get the specific regulations for that license category. From there you'll need to secure a zoned property, write required policies, build a staffing plan, complete any administrator training, and pass a pre-licensing inspection before you can open.
How much does it cost to open a residential care home?
There's no single reliable national figure since it depends on property costs, renovations, and your state's license fees. State licensing fees themselves often range from under $100 to several thousand dollars depending on facility size. Confirm the current fee schedule directly with your state licensing agency before budgeting.
What's the difference between a residential care home and an assisted living facility?
In many states, residential care home refers to a smaller, home-based setting (often 4 to 10 residents) while assisted living facility can also describe larger, apartment-style communities. The terms overlap and states define them differently, so always check your state's specific licensing chapter for the exact distinction.
Can one facility serve seniors and people with disabilities under the same license?
Usually no. Most states issue separate license categories for senior assisted living, IDD group homes, and mental health residential programs, each with different staff training and physical plant requirements. Serving a different population than your license allows typically requires a new application, more than a policy update.
How long does it take to get an assisted living or group home license approved?
Timelines vary widely by state and by how complete your application is, but a realistic planning window is 4 to 12 months from initial planning to licensed opening, covering zoning, property prep, staffing, application review, and inspection. Ask your state licensing office for their current average processing time when you apply.
Do assisted living facilities get inspected regularly?
Yes. Most states require periodic inspections, often annually, covering resident records, medication logs, staff training files, and building fire safety. Facilities can also face complaint-triggered, unannounced inspections at any time if a resident, family member, or staff member files a concern with the state licensing agency.
Sources
- CMS, Nursing Home Reform Law overview (42 CFR Part 483): CMS regulates nursing homes federally, unlike assisted living which has no federal licensing equivalent
- Genworth, Cost of Care Survey 2024: Median 2024 monthly cost was $5,900 for assisted living and $10,646 for a private nursing home room
- Medicare.gov, What Part A covers / long-term care: Medicare does not cover custodial care, including assisted living room and board
- Medicare.gov, Skilled nursing facility care coverage: Medicare Part A may cover a short-term skilled nursing facility stay after a qualifying hospital stay
- Medicaid.gov, Home and Community-Based Services 1915(c) waivers: States use 1915(c) HCBS waivers to cover personal care services in assisted living settings