© 2035 by The Clinic. Powered and secured by Wix
What Does the Changing Labor Environment Mean for My Adult Family Home?
Washington Adult Family Home providers are facing real changes in how caregiver labor may need to be valued and managed.
That does not mean the AFH business model cannot work.
It means the assumptions behind the business may need to change.
This analysis looks past the fear and asks a more useful question:
What does the math say my home needs in order to remain financially sustainable?
We will examine the traditional three-live-in-caregiver model, show where overtime and unpaid owner labor can hide the true cost of care, explain the financial terms every provider should understand, and identify the staffing, occupancy, rates and payer mix a sustainable home may require.
This is an educational financial-planning resource from Arete Architecture. It is not legal, employment, accounting, Medicaid reimbursement or operational advice.
The Question Behind the Fear
A recent Washington Supreme Court decision involving live-in caregivers has focused significant attention on minimum wage, overtime and the long-standing economics of caregiver staffing in Adult Family Homes.
In Bolina v. AssureCare Adult Home LLC, filed July 9, 2026, the Washington Supreme Court affirmed a trial-court ruling that the former Minimum Wage Act live-in exemption violated the Washington Constitution as applied to live-in caregivers at Adult Family Homes. The Supreme Court also left the question of prospective versus retroactive application unresolved for further proceedings in the trial court.
Providers should obtain appropriate employment-law guidance regarding how the decision applies to their specific business.
That is not what this page attempts to do.
Instead, we are asking:
What happens to the business model if we assume caregiver hours must be treated as real labor costs and routine overtime must be paid?
That is something we can model.
And once we can model it, providers can begin focusing on the parts of the business they can actually control.
Consider a six-bed Adult Family Home using three live-in caregivers.
For this example, assume each caregiver works:
12 hours/day × 6 days/week
= 72 HOURS PER WEEK
Three caregivers therefore provide:
3 caregivers × 72 hours
= 216 STAFFING HOURS PER WEEK
Now compare that with the staffing model we will use throughout this analysis:
Two caregivers from 8:00 a.m. to 8:00 p.m.
plus
One caregiver from 8:00 p.m. to 8:00 a.m.
That requires:
36 staffed hours/day × 7 days
= 252 STAFFING HOURS PER WEEK
HOURS PROVIDED
216
HOURS REQUIRED
252
36 HOURS ARE STILL UNCOVERED EVERY WEEK
Even after all three caregivers work six 12-hour days.
Someone still has to provide another three 12-hour shifts every week.
And Then There Is Overtime
A caregiver working 72 hours in one workweek has:
40 regular hours
plus
32 overtime hours
Washington Labor & Industries states that most employees working more than 40 hours in a seven-day workweek must receive overtime of at least 1.5 times their regular hourly rate.
For three employees:
3 caregivers × 32 overtime hours
= 96 OVERTIME HOURS EVERY WEEK
That is the important distinction.
Overtime is no longer being used to solve an occasional call-out or emergency.
Overtime has become part of the normal staffing architecture.
And the home still has 36 uncovered hours.
What If the Owner Covers the Missing Hours?
That is one way many homes may make the schedule work.
But financially, something important happens.
36 uncovered hours/week × 52 weeks
= 1,872 HOURS OF OWNER LABOR PER YEAR
That is approximately:
47 FULL 40-HOUR WORKWEEKS
If those hours are not assigned an economic value, they disappear from the financial statement.
The home may appear profitable.
But the owner is effectively contributing almost a full year's worth of unpaid labor.
There is nothing inherently wrong with an owner choosing to work inside their own home.
The important distinction is understanding the difference between:
Compensation for working in the business
and
Return for owning and taking the risk of the business
For this analysis, we want to know whether the home can produce an ownership return after paying for the labor required to operate it.
Before We Look at the Numbers,
Let's Define the Numbers
AFH providers do not need to become accountants to manage their economics.
But there are several business terms worth understanding.
Revenue
Revenue is all of the money the home earns from resident care.
If a resident generates $200 per day for 365 days:
$200 × 365
= $73,000 ANNUAL REVENUE
Revenue tells us how much money entered the business.
It does not tell us how much the owner made.
Average Daily Revenue — ADR
Average Daily Revenue, or ADR, is the average revenue generated per occupied resident per day.
Imagine two residents:
Resident A generates $190/day
Resident B generates $310/day
Together:
$190 + $310 = $500/day
Across two residents:
$500 ÷ 2
= $250 BLENDED ADR
We use the term blended ADR because residents may generate different rates.
This will become one of the most important numbers in the entire analysis.
Base Caregiver Wages
Base caregiver wages are simply:
Paid caregiver hours × hourly wage
If a home requires 13,140 annual caregiver hours and pays $20 per hour:
13,140 × $20
= $262,800 IN BASE WAGES
But $20 per hour is not necessarily the employer's entire cost of employing that worker.
Employer Labor Load
Throughout this analysis, Employer Labor Load means our estimated allowance for employment costs that exist in addition to base hourly wages.
These may include items such as:
-
employer payroll taxes;
-
workers' compensation costs;
-
unemployment insurance;
-
paid-leave and relief burden; and
-
other payroll-related employment costs.
For this simplified analysis, we use an:
18% EMPLOYER LABOR LOAD
This is a planning assumption.
It is not a Washington statutory rate, and it should not be interpreted as the actual labor burden of every Adult Family Home.
Each provider's real cost will be different.
MATH MOMENT
If base wages equal:
$250,000
Then:
$250,000 × 18% = $45,000
Estimated loaded labor cost:
$295,000
Or:
Base wages × 1.18 = Estimated loaded labor cost
Overtime is calculated separately when a staffing model creates overtime.
Direct Costs
For this simplified analysis, direct costs include:
-
caregiver wages;
-
Employer Labor Load;
-
resident food; and
-
direct resident supplies.
We intentionally stop there.
That allows us to answer one specific question:
After paying the direct costs of serving residents, how much money remains to support the rest of the business?
Contribution Margin
The money remaining after these direct costs is the home's contribution.
The percentage remaining is the contribution margin.
Revenue – Direct Costs = Contribution
Then:
Contribution ÷ Revenue = Contribution Margin
$1 OF REVENUE
Provide a general description of the items below and introduce the services you offer. Click on the text box to edit the content.
At a 35% contribution margin:
At a 40% contribution margin:
At a 50% contribution margin:
$0.65 pays direct resident-care costs.
$0.35 remains for everything else.
$0.60 pays direct resident-care costs.
$0.40 remains.
$0.50 pays direct resident-care costs.
$0.50 remains.
Gross Margin
You may also hear the term gross margin.
Different businesses can include different expenses when calculating gross margin.
For clarity, this analysis primarily uses contribution margin, because we can clearly state which expenses have—and have not—been included.
Net Margin
Net margin is much closer to what remains after the other expenses of operating the business have also been paid.
That may include:
-
mortgage or facility rent;
-
utilities;
-
insurance;
-
bookkeeping;
-
licensing;
-
administration;
-
marketing;
-
professional services;
-
repairs;
-
capital reserves;
-
debt service; and
-
other business overhead.
Only after those expenses are considered can an owner evaluate the actual return produced by the business.
Full-Time Equivalent — FTE
A Full-Time Equivalent, or FTE, converts labor hours into the equivalent of a 40-hour-per-week employee.
If the home requires:
252 staffed hours/week
Then:
252 ÷ 40
= 6.3 FTE OF SCHEDULED COVERAGE
That does not mean the correct answer is simply to hire 6.3 people.
Actual headcount will depend on full-time and part-time schedules, days off, vacation, sick leave, training, employee availability and relief coverage.
FTE is simply a way to understand the amount of labor the home needs.
Why We Are Not Including
Every Business Expense Yet
Why aren't mortgage payments, insurance, utilities and administration included in the baseline model?
Because they vary dramatically from one home to another.
An owner who purchased a home 15 years ago may have a completely different mortgage from someone purchasing today.
One provider may do their own bookkeeping.
Another may hire an administrator.
One building may need significant capital repairs.
Another may not.
If we try to create one universal estimate for all of these expenses, we risk making the model less useful instead of more accurate.
So we start with the first question:
Does the resident-care operation itself produce enough contribution to support the rest of the business?
Once a provider knows that answer, they can compare the remaining dollars with the fixed expenses of their own home.
So How Much Contribution Should a Healthy Home Produce?
There is no universal Adult Family Home contribution-margin standard that says every provider must achieve a particular percentage.
For this analysis, we use three planning benchmarks.
They are not industry standards.
They are tools for evaluating whether sufficient money remains to support the rest of the business.
35% CONTRIBUTION MARGIN
Minimum Healthy Planning Target
At 35%, direct costs consume 65 cents of every revenue dollar.
The remaining 35 cents still have to support the building, utilities, insurance, administration, repairs, marketing, debt and ownership return.
On $500,000 of revenue:
$500,000 × 35%
= $175,000 REMAINING
A 35% contribution margin does not guarantee profitability.
We use it as a minimum healthy planning target because below that level progressively less money remains to support everything we have intentionally excluded.
40%–45% CONTRIBUTION MARGIN
Strong Operating Target
At 40% on $500,000 of revenue:
$200,000 REMAINS
At 45%:
$225,000 REMAINS
This provides more capacity to absorb facility expenses, overhead, repairs, vacancy and ownership return.
For this analysis, we consider 40%–45% a strong operating range.
50% CONTRIBUTION MARGIN
Excellent / Premium Operating Target
At 50%:
Half of every revenue dollar remains after the direct resident-care costs included in this model.
On $500,000:
$250,000 REMAINS
This creates substantially more operating flexibility.
As we will see, however, reaching 50% becomes difficult in higher-wage markets and generally requires favorable rates, payer mix, occupancy, staffing efficiency or scale.
The objective is not to chase a percentage.
The real question is:
After paying my direct resident-care costs, is enough money left to pay the expenses unique to my home and produce an acceptable ownership return?
Our Six-Bed Baseline Model
To compare different markets consistently, we need one common operating model.
We use a six-bed Adult Family Home.
The companion Home Analysis Tool will allow providers to test their own capacity, including an eight-bed scenario.
Baseline assumptions
AssumptionModel
Licensed beds 6
Expected vacancy 1 bed vacant for 6 months/year
Average occupied beds 5.5
Occupied resident-days/year 2,007.5
Daytime staffing 2 caregivers × 12 hours
Overnight staffing 1 caregiver × 12 hours
Total staffing requirement 36 hours/day
Annual staffing requirement 13,140 hours
Unpaid owner caregiving None
Food + direct resident supplies 25/occupied resident-day
Employer Labor Load 18% planning assumption
For Medicaid revenue, we use Washington's published July 1, 2026 weighted average Adult Family Home daily rate of $191.89.
For wage comparisons, we use three geographic examples:
Market Example 2026 Wage Used
Seattle $21.30/hour
Unincorporated King County qualifying small-employer example $18.32/hour
Washington statewide minimum-wage example $17.13/hour
Seattle's 2026 minimum wage is $21.30.
Unincorporated King County's 2026 general minimum is $20.82, with a temporary $18.32 rate for qualifying employers with 15 or fewer employees and less than $2 million in annual gross revenue. Individual King County cities may have different requirements.
Washington's statewide 2026 minimum wage is $17.13.
These wage rates are examples for financial modeling. Providers need to verify the wage requirement applicable to their location and employment situation.
Labor Alone Changes the Economics
Our staffing model requires:
36 hours/day × 365 days
= 13,140 CAREGIVER HOURS PER YEAR
At the example wage rates:
Market Base Wages Loaded Labor at 18%
Seattle $279,882 $330,261
King County $240,725 $284,055
Washington Statewide $225,088 $265,604
That is before food.
Before the building.
Before insurance.
Before administration.
Before repairs.
Before ownership return.
This is why the staffing model must be understood first.
Then Add Food and Direct Resident Supplies
We use a planning assumption of:
$25 PER OCCUPIED RESIDENT PER DAY
At 2,007.5 occupied resident-days:
2,007.5 × $25
= $50,188 PER YEAR
Adding this to loaded caregiver labor produces:
Market Loaded Labor Food + Supplies Total Direct Cost
Seattle $330,261 $50,188 $380,448
King County example $284,055 $50,188 $334,243
Washington Statewide $265,604 $50,188 $315,792
Now we can compare the actual cost structure with revenue.
What Happens at 100% Medicaid?
At an average census of 5.5 residents and a weighted Medicaid Average Daily Revenue of $191.89:
5.5 residents × 365 days × $191.89
= APPROXIMATELY $385,219 ANNUAL REVENUE
Now compare that with direct cost:
Market Medicaid Revenue Direct Cost Contribution Margin
Seattle $385,219 $380,448 1.2%
King County example $385,219 $334,243 13.2%
Washington Statewide $385,219 $315,792 18.0%
SEATTLE
$385,219
Resident revenue
minus
$380,448
Direct resident-care cost
equals
$4,771
Remaining contribution
or approximately:
1.2%
And the home has not yet paid its building costs, utilities, insurance, bookkeeping, licensing, marketing, professional services, repairs, administration, debt obligations or ownership return.
Why This Matters
We have established 35% as our minimum healthy planning benchmark.
The modeled 100% Medicaid results are approximately:
1% in Seattle example
13% in the King County example
18% in the Washington Statewide example
The problem is not simply that these percentages are below 35%.
The problem is what remains in actual dollars to operate the rest of the business.
That is why full occupancy alone does not necessarily equal financial sustainability.
Now Revisit the Three-Live-In Model
We can now put dollars around the staffing problem we saw at the beginning.
Three caregivers working 72 hours per week create:
96 OVERTIME HOURS EVERY WEEK
and still leave:
36 HOURS OF COVERAGE UNFILLED
If the owner works those remaining hours without pay, the cost disappears from the financial model.
If we value all required labor, the economics become very different.
Using the same six-bed, 100% Medicaid assumptions:
Staffing Model Seattle King County Example Across WA
Intentionally scheduled staffing 1.2% 13.2% 18.0%
without routine overtime
3 live-ins + owner works remaining (2.6%) 9.9% 14.9%
36 hrs/week unpaid
3 live-ins + remaining coverage (14.8%) (0.6%) 5.1%
is also paid
Text in parenthesis means the number is negative
The important lesson is not that live-in caregivers themselves are the problem.
It is this:
Concentrating required staffing hours into employees who routinely work overtime can cost more than intentionally designing the schedule to avoid routine overtime.
And if the schedule still requires unpaid owner labor, part of the apparent profitability is being created by the owner donating labor to the business.
Stop Asking Only: “What Does Medicaid Pay?”
A stronger business question is:
What does each occupied bed need to produce per day for my home to work?
That number is the home's:
REQUIRED BLENDED AVERAGE DAILY REVENUE
Under our baseline assumptions:
Market 35% Target 40% Target 45% Target 50% Target
Seattle $292/day $316/day $345/day $379/day
King County example $256/day $277/day $303/day $333/day
Washington Statewide $242/day $262/day $286/day $315/day
Compare those numbers with the $191.89 weighted Medicaid ADR used in this analysis.
This is the economic gap the operator must solve.
What Is the Required ADR for Your Home?
The numbers above use our assumptions.
Your home may have a different wage, occupancy, staffing requirement, Medicaid rate or direct resident cost.
se the free AFH Home Analysis Tool to calculate the blended ADR your own home needs to reach a 35%, 40% or 50% contribution margin.
Payer Mix Becomes a Business Decision
If Medicaid revenue by itself does not produce the required blended ADR, the home has to close the gap somewhere.
One potential lever is private pay.
For illustration, consider private-pay rates of:
$8,000/month
$9,000/month
$10,000/month
These are simply planning examples. They are not claims about what every AFH can or should charge.
What Does It Take to Reach the 35% Planning Target?
Approximate share of occupied resident-days that would need to be private pay:
Private-Pay Rate Seattle King County WA Statewide
$8,000/month Not achievable ~90% ~70%
$9,000/month ~96% ~62% ~48%
$10,000/month ~73% ~47% ~37%
At $10,000/month and 5.5 average occupied residents, that translates approximately to:
Seattle
4.0 OF 5.5 OCCUPIED BEDS PRIVATE PAY
King County Example
2.6 OF 5.5
Lower-Cost Washington
2.0 OF 5.5
These are averages across the year, not literal recommendations to have fractions of a resident.
The Home Analysis Tool will translate the math into the economics of the provider's actual occupancy.
What Does It Take to Reach 40%, 45% or 50%?
Using a $10,000/month private-pay example:
Contribution Target Seattle King County WA Statewide
35% ~73% private pay ~47% ~37%
40% ~91% private pay ~63% ~51%
45% Not achievable at $10K ~81% ~69%
50% Not achievable at $10K Not quite achievable ~90%
This is why we do not use a 70% contribution margin as the target for a conventional six-bed AFH.
For most homes, that benchmark would require rates far outside the economics we are analyzing.
The more useful objective is to understand:
What contribution margin does my home need—and what combination of rates, occupancy and payer mix gets me there?
Vacancy May Be More
Expensive Than It Looks
Our model assumes one of six licensed beds is vacant for six months.
That produces:
5.5 AVERAGE OCCUPIED BEDS
The important problem is that the staffing requirement may not fall proportionally when one bed becomes empty.
Much of the labor cost remains.
At $191.89 per day, six months of vacancy represents approximately:
$35,000 OF LOST REVENUE
At $9,000 per month private pay:
$54,000 OF LOST REVENUE
Those bed-days cannot be sold later.
That makes vacancy more than a marketing problem.
It is an asset-utilization problem.
So, What Operating Model Would We Pursue?
The math suggests that a more sustainable AFH has five characteristics.
1. Medicaid Cannot Automatically Be the Economic Foundation of the Home
Medicaid can remain an important part of a home's mission and payer mix.
But providers should not assume that reimbursement automatically supports their staffing structure.
Instead ask:
How many Medicaid residents can my home economically support while still reaching the contribution margin I need?
That answer may be different in Seattle than it is in Spokane.
It may also be different for two homes across the street from one another if their staffing and facility costs differ.
2. The Operator Needs a Minimum Blended ADR
Every provider should know:
What must my occupied beds average per day?
If the home needs a $270 blended ADR and is currently generating $220, management has identified a measurable financial gap.
Then the operator can work on the variables that affect it:
occupancy
payer mix
private-pay pricing
staffing cost
direct resident costs
capacity
Without knowing the required blended ADR, these decisions are largely being made by feel.
3. Routine Overtime Should Be Designed Out of the Staffing Model
Overtime will happen.
Employees become sick.
Vacancies occur.
Emergencies happen.
But there is a major difference between overtime being used for an exception and a normal staffing schedule that requires overtime every week.
The three-live-in example produces 96 overtime hours per week and still leaves 36 hours uncovered.
A stronger staffing model intentionally creates enough normal labor capacity to deliver normal coverage without depending on chronic overtime.
4. Staff Specialization Must Earn Its Way Into the Model
AFH caregivers may perform far more than hands-on resident care.
The factual record in Bolina described caregivers who also cooked, cleaned, did laundry, purchased groceries, transported residents, performed basic maintenance and completed administrative work.
Would a separate cook, housekeeper, maintenance person or administrator make sense?
Possibly.
But specialization should earn its cost.
Ideally, a specialized position should:
-
reduce other labor hours;
-
prevent overtime;
-
allow caregivers to support higher-acuity residents;
-
improve the service enough to support higher rates;
-
increase capacity;
-
improve occupancy;
-
improve staffing reliability; or
-
materially reduce operating risk.
Otherwise the home may simply be adding another payroll expense to a small fixed-capacity business.
5. The Vacant-Bed Problem Must Be Attacked Aggressively
One empty bed in a six-bed home represents roughly one-sixth of its licensed revenue capacity.
But much of the staffing cost remains.
That means providers should not begin marketing when a resident leaves.
A healthier operating model creates an ongoing referral pipeline through sources such as referral partners, hospitals, case managers, placement resources, professional relationships, reputation and prior inquiries.
The objective is simple:
REDUCE VACANT BED-DAYS
Every vacant day represents revenue capacity that cannot be recovered later.
Could Moving From Six Beds to Eight Help?
Potentially.
This is one of the reasons capacity is such an interesting financial lever.
If a home can serve additional residents without increasing staffing cost at the same rate as revenue, more resident revenue can be spread across an existing fixed labor structure.
That can materially improve unit economics.
But eight beds are not automatically better than six.
Additional capacity may require additional staffing, property improvements, financing, design work, licensing considerations and different operating procedures.
So we intentionally keep the examples in this report based on a:
SIX-BED HOME
because it is the most broadly useful comparison.
The AFH Home Analysis Tool will allow a provider to test an eight-bed scenario against their own assumptions and determine whether the additional capacity actually improves their economics.
Considering Expanding From Six Beds to Eight?
The financial question is only one part of the decision.
The property and building must also be capable of supporting the additional capacity.
Arete Architecture helps Washington AFH providers evaluate properties, additions, renovations and expansion strategies before major capital is committed.
What About Charging a Live-In Caregiver Rent or Room and Board?
Housing may have economic value.
A live-in caregiver may receive a room, utilities, meals, parking or other benefits.
Could a provider charge rent?
Could certain housing arrangements affect the overall economics?
Possibly.
But we intentionally do not include room-and-board deductions or caregiver rent in the core financial model.
There are two reasons.
-
First, housing value can vary substantially based on geography, room size, private versus shared bathroom, amenities, meals, utilities, parking and the specific property.
-
Second, wage deductions, lodging arrangements, minimum wage and overtime can involve employment-law requirements that should not be reduced to a simple spreadsheet assumption.
The Bolina record itself notes that caregivers received room and board and other benefits, while the Supreme Court nevertheless held the former statutory live-in exemption unconstitutional as applied to AFH caregivers.
For that reason:
This analysis does not assume that rent, room, board or housing benefits reduce required wages or overtime.
Providers considering live-in housing arrangements should evaluate the housing economics separately and obtain appropriate Washington employment-law advice regarding the structure.
This may be a legitimate financial lever.
It simply should not be used to make the core model look better before the legal and financial treatment is understood.
The Point Is Not That the Adult Family Home Model Is Broken
Conditions are changing.
That means some of the assumptions behind the traditional operating model may also need to change.
But that does not mean the business cannot work.
The economics give providers a set of measurable levers:
STAFFING COST
OCCUPANCY
PAYER MIX
RESIDENT RATE
OPERATING EFFICIENCY
CAPACITY
Those variables can be modeled.
And once they are modeled, providers can make decisions based on what their home actually needs rather than reacting only to fear.
The goal is not to preserve an old operating model regardless of what changes around it.
The goal is to build an Adult Family Home business model that remains financially sustainable under the conditions that actually exist.
Now Ask:
What Does This Mean for My Home?
Every AFH is different.
The assumptions used above will not exactly match your home.
That is why we created the:
AFH HOME ANALYSIS TOOL
This free spreadsheet is designed to help you replace our assumptions with a few meaningful numbers from your own business.
You will be able to test items such as:
-
licensed capacity, including an eight-bed scenario;
-
expected vacancy;
-
Medicaid Average Daily Revenue;
-
private-pay rate;
-
caregiver wage;
-
required daytime and overnight staffing;
-
Employer Labor Load; and
-
food and direct resident-supply cost.
The tool will then help you estimate:
-
average occupied beds;
-
annual staffing hours;
-
approximate Full-Time Equivalent staffing requirement;
-
direct resident-care costs;
-
estimated contribution margin;
-
blended Average Daily Revenue required to reach a 35%, 40% or 50% contribution margin; and
-
the approximate Medicaid/private-pay mix associated with those targets.
No email gate required.
Use it to understand your existing home, test a future scenario, or evaluate how changes in staffing, vacancy, rates or capacity could affect the economics.
Four Numbers Every AFH Owner Should Know
1. What does it really cost to staff my home?
Not what payroll used to cost.
What does the coverage the home actually requires cost?
2. What blended Average Daily Revenue must my occupied residents produce?
What does the home need to average—not just what one resident pays?
3. How many Medicaid residents can my business economically support?
What payer mix allows the home to achieve the contribution it needs?
4. Is the home producing a return on ownership—or is the owner subsidizing the business with unpaid labor?
Both owner-operated and investor-operated models can exist.
The important thing is knowing which one you actually own.
Why Is an Architecture Firm Talking
About AFH Economics?
Major decisions about an Adult Family Home's building cannot be separated entirely from the business the building must support.
Providers make significant capital decisions when they:
-
buy a property;
-
renovate an existing AFH;
-
add bedrooms;
-
expand capacity;
-
improve accessibility;
-
reposition a home for a different resident population; or
-
develop a new facility.
A building solution can be technically possible and still make little economic sense.
At Arete Architecture, our role is not to provide employment or operational consulting.
Our goal is to help AFH owners make more predictable development and facility decisions by understanding the business conditions the property ultimately needs to support.
FAQ
Why does the report use a six-bed home?
Six beds provide a broadly useful baseline for comparing the economics of different wage markets and payer mixes. The companion Home Analysis Tool allows providers to test different licensed capacities, including eight beds.
Why don't you include my mortgage, utilities and insurance?
Those costs vary too widely among properties to create one meaningful industry assumption. This model first asks whether the resident-care operation creates enough contribution to support the rest of the business. Providers can then compare that contribution with their own fixed costs.
Is 35% an AFH industry standard?
No. The 35%, 40%–45% and 50% contribution margins in this analysis are planning benchmarks, not established AFH industry standards. They are intended to help providers understand how much revenue remains after the direct resident-care costs included in the model.
Does the analysis say I should stop accepting Medicaid?
No. The analysis does not recommend a particular payer mix. It helps providers determine whether their specific staffing model, costs, rates and occupancy allow a given payer mix to work financially.
Does the analysis tell me how many caregivers I should hire?
No. The model calculates required staffing hours and approximate Full-Time Equivalent coverage based on the staffing pattern entered. Actual headcount depends on scheduling, full-time and part-time employment, days off, leave, relief coverage, training and resident needs.
Is this legal or employment advice about the Bolina decision?
No. The legal environment continues to develop, and providers should obtain qualified Washington employment-law guidance regarding their own circumstances. The financial model asks a narrower question: what happens economically when required caregiver labor and overtime are treated as real costs?
Important Notice
This resource is provided by Arete Architecture for general educational and financial-planning purposes.
Arete Architecture is not providing legal, employment, tax, accounting, Medicaid reimbursement or Adult Family Home operational consulting advice through this resource or the accompanying spreadsheet.
The financial examples are simplified planning models based on stated assumptions and should not be interpreted as forecasts, legal conclusions or guarantees of profitability.
Actual wage requirements, employment classifications, overtime obligations, reimbursement, resident acuity, staffing requirements, occupancy, expenses and other conditions vary by provider and jurisdiction.
Providers should verify current wage, employment and reimbursement requirements with appropriate government agencies and qualified professionals and should use their actual business costs when evaluating their own operations.
Sources Used in This Analysis
Washington Supreme Court — Bolina v. AssureCare Adult Home LLC, No. 103519-5, filed July 9, 2026.
The court affirmed partial summary judgment regarding the former live-in exemption as applied to AFH caregivers and left prospectivity/retroactivity as a live issue for the trial court.
Washington State Department of Labor & Industries — Overtime & Exemptions.
Most employees working more than 40 hours in a seven-day workweek must receive overtime of at least 1.5 times their regular rate.
Washington State Department of Labor & Industries — 2026 Minimum Wage.
Washington statewide minimum wage: $17.13/hour.
Seattle Office of Labor Standards — 2026 Minimum Wage.
Seattle minimum wage: $21.30/hour.
King County — 2026 Minimum Wage in Unincorporated King County.
General rate $20.82/hour, with temporary reduced rates for certain qualifying smaller employers, including $18.32/hour for employers meeting the stated size and revenue criteria.
Washington Health Care Authority — Medicaid State Plan Amendment 26-0016 notice.
Published weighted average Adult Family Home daily rate used in this analysis: $191.89 effective July 1, 2026.