Starting an Assisted Living Facility in Michigan: A Guide

Are you looking to start an assisted living facility in Michigan?

What unique problems might you run into? What’s special about assisted living facilities in Michigan? What steps can you take today to make your business idea a reality?

In this article, we’ll show you the specific laws and regulations surrounding assisted living facilities in Michigan – including the difference between an “assisted living facility,” an “adult foster care facility,” and a “home for the aged,” – and we’ll guide you toward the best course of action.

What’s Different About Michigan Assisted Living Facilities?

Isn’t assisted living the same everywhere? Why should starting an assisted living facility in Michigan be any different than anywhere else?

Well, no, assisted living is not the same everywhere. Rules and regulations for assisted living facilities vary from state to state. There actually isn’t any federal regulation, so paying extra special attention to your state’s laws is paramount.

Just because you have experience opening a successful assisted living facility in California doesn’t mean that experience will necessarily transfer to opening a successful assisted living facility in Michigan. The laws, regulations, and quality control might be completely different, and so one of those elements might radically change your business plan. In fact, depending on your organization’s goals and quality of care, you might not even be opening just an “assisted living facility.” It might actually be called something completely different, as you’ll see.

Furthermore, the residential care business, as well as real estate in general, is all about location. If you’re not willing to do some research on what’s different about assisted living in Michigan, you’re not off to a good start.

Luckily, we’re here for you. We’ll break down everything you need to know.

Cost of Care in Michigan

The Genworth Cost of Care Survey 2018 breaks down the cost of assisted living nationally and by state. Now, we know you’re looking to purchase an assisted living facility – not just assisted living services for a loved one – but this data might help you determine your competition’s rates. That could provide you with some valuable information on how you can outperform them, whether it’s in service, quality, or price. It’s a good place to begin.

Nationally, the cost for assisted living is pretty high: it works out to about $133 per day for most, and $278 per day for a private room. Full-time home health aide services aren’t that much better, either, with an average of roughly $127 per day.

The costs for assisted living in Michigan are both higher and lower than the national average, so that indicates, for certain services, the market is ripe for arbitrage. The median cost for assisted living in Michigan is $126 per day for most, and $300 for a private room. Full-time home health aide services work out to roughly $137 per day.

The cost of assisted living in Michigan isn’t all that competitive, then. As we talked about in a previous article, the proportion of older Americans is growing every day – and so, then, is the demand for assisted living care.

What else about assisted living in Michigan do you need to know?

The Difference Between “Assisted Living Facilities,” “Adult Foster Care Facilities,” and “Homes for the Aged.”

For one, regulatory agencies in Michigan don’t use the term “assisted living facilities.” Instead, they prefer the terms, “adult foster care facilities” (also known as an AFC or AFC home) and “homes for the aged.” Among other things, this means that assisted living facilities in Michigan don’t necessarily have to be licensed. The Department of Licensing and Regulatory Affairs only licenses adult foster care facilities and homes for the aged, and the licensing requirement is different for both.

This all might sound semantic, but it’s actually incredibly important. In order to qualify for an SBA 7(a), the primary method of financing for most assisted living facilities, you’re very likely going to need to be licensed.

And, before you apply for licensing in Michigan to start your organization, you’re going to want to know if you want to make it an AFC or a home for the aged. Each of them are designed, of course, to provide care to individuals who need some sort of assistance, but there are important differences.

Assisted Living Facilities in Michigan

Since Assisted Living Facility doesn’t technically refer to any sort of licensing, it’s possible that some room and board facilities and certain types of senior housing don’t need to be licensed, as we mentioned before, so it’s important to understand the rules and regulations to avoid any legal issues. Unlicensed facilities may not qualify for an SBA 7(a). There are other financing options available for your venture, but the SBA 7(a) is by far the most popular when starting or buying an assisted living facility.

For consumers, this means that the term “assisted living facility” only exists in Michigan to borrow some brand name recognition from other assisted living facilities that exist across the nation. Assisted living facilities in Michigan, then, may refer to any type of residential facility that provides some sort of personal or medical care.

Adult Foster Care Facilities

What is an adult foster care facility and how does it differ from other types of assisted living facilities?

As stated by The Department of Licensing and Regulatory Affairs,

“Adult foster care is a specific type of assisted living, as outlined in Public Health Code Act 218 of the Michigan legislature.”

It goes on to outline the exact provisions of supervision, personal care, and protection for every AFC resident, as well as the requirements for room and board – all of which are fairly straightforward and easy to understand.

In order to develop a more comprehensive idea of the differences between adult foster care and every other type of facility, it might be easier to focus on what adult foster care isn’t. As they list in the article, adult foster care isn’t:

  • A nursing home, because the residents don’t require continuous care.
  • “It is not a room and board situation, because 24-hour supervision is provided.” Now, this is a little confusing and contradictory. The “Adult Foster Care Tutorial” says just a few sentences above that, “Foster care means the provision of supervision, personal care, and protection in addition to room and board.” When they wrote this, I’m sure they meant it isn’t strictly a room-and-board situation, because of the necessity for high-quality care. (Aren’t you glad we’re going through all this data for you?)
  • Not strictly a home care service, because you need physical real estate.
  • And, of course, it excludes other facilities that require different licensing, like “Homes for the Aged,” “Hospitals,” “Facilities Operated by the Department of Community Health,” and “Children’s Facilities.”

So, in that case, what makes a home for the aged any different from an adult foster care facility?

Home for the Aged

Also, as stated by the Department of Licensing and Regulatory Affairs:

  • A home for the aged is a specific type of assisted living, as outlined in Public Health Code Act 368 and the administrative rules.
  • “Home for the aged means a supervised personal care facility that provides room, board, and supervised personal care to 21 or more unrelated, non-transient individuals 55 years of age or older. Home for the aged includes a supervised personal care facility for 20 or fewer individuals 55 years of age or older if the facility is operated in conjunction with and as a distinct part of a licensed nursing home.”

The second rule is by far the most important: adult foster cares have a specific cap on how many individuals can be members of the facility. A home for the aged doesn’t necessarily have that same cap.

And here’s what a home for the aged is not, with some explanatory comments thrown in:

  • It is not a nursing home. (The licensing required for nursing homes is different from the licensing required for homes for the aged).
  • “It is not a room and board situation.” (Here we go again… They probably mean it isn’t strictly a room and board situation, but it might be a good question to ask the Department of Licensing and Regulatory Affairs when you apply).
  • The other two rules are the same as the ones stated above for adult foster care facilities: It’s not strictly a home care service, because you need physical real estate.
  • And, of course, it excludes other facilities that require different licensing, like “Adult Foster Care (AFC),” “Hospitals,” “Facilities Operated by the Department of Community Health,” and “Children’s Facilities.”

Questions to Ask Yourself Before Applying for a License

Finally, there are some important questions you should ask yourself before determining this route is the one you want to take – whether you want to apply to start or buy an adult foster care facility or home for the aged. Let’s review those questions now.

  • Do you believe you have the required business expertise to successfully run one of these facilities?
  • What insurance are you going to buy?
  • How are you going to finance? (Hint, hint: We have an article on that…)
  • And, most importantly, are you able and willing to have the government look through you and your family’s financial history and criminal records to prove that you’re an upstanding citizen?

In order to run a licensed assisted living facility in Michigan, you have to make a positive impression on the public. Otherwise, the government will likely not grant you a license to operate.

Think about it from the consumer’s perspective: No one wants to invest hard-earned money in someone they can’t trust. With assisted living prices as high as they are, that’s doubly true.

So, if you’ve had a run-in with the IRS, or if you’ve declared bankruptcy in the past ten years, or if you’ve had multiple run-ins with the law, it’s likely going to be that much more difficult to secure a license for your assisted living facility. That’s simply the reality of what you’re about to go through.

That doesn’t mean, however, that it’s impossible. Communication is important, so make sure to talk with whoever’s in charge of licensing and be ready to explain any moral shortcomings you may or may not have.

Conclusion: Starting or Buying an Assisted Living Facility in Michigan

As you’ve learned, laws and regulations regarding assisted living facilities vary from state to state. Starting an assisted living facility in Michigan is not the same thing as starting an assisted living facility in California. For that reason, it’s incredibly important to do state-specific research.

The average cost for assisted living in Michigan is a little bit lower than the national average for most assisted living setups, at $126 per day, and a little bit higher for private assisted living (that is, the elderly person has his or her own private room in a facility) at a much higher $300 per day. This information could be central to your business strategy. If you have experience opening assisted living facilities that specialize in low costs for private rooms, you might want to consider expanding into the Michigan markets.

The most important thing you’ll need to know about purchasing an assisted living facility in Michigan, or starting one from scratch, is that there’s a difference between “room and board,” which are unlicensed, and “adult foster care facilities,” and “homes for the aged.” The latter two are licensed differently, but the principal difference is that a home for the aged is limited to residents age 55 and older and can’t care for people with some other specific needs. According to the Adult Foster Care Facility Licensing Act, adult foster care facilities can have a maximum number of residents based on certain characteristics of the facility itself, but cannot be licensed for more than 20.

We hope that this guide has pointed you in the right direction for starting an assisted living facility in Michigan. Once you know the differences between each type of facility, it becomes that much easier to fill out the requisite paperwork and apply for your license.

We wish you the best of luck.