Other Residential Care Facilities (U.S.) — NAICS 6239

A Histometrics industry primer for public-market and private investors

Single-child level. In the North American Industry Classification System (NAICS), the 4-digit industry group 6239 contains exactly one 5-digit industry, 62399, which in turn has one 6-digit national industry, 623990. All three lines describe the same set of establishments.

1. Overview

NAICS 6239, "Other Residential Care Facilities", is the catch-all layer of the residential-care family: round-the-clock places where people live and receive supervision and personal care but not skilled nursing or a hospital-level medical program. In practice that means youth group homes, group foster homes, orphanages and children's homes, homes for unwed mothers, halfway houses for delinquents and ex-offenders, non-correctional disciplinary/"boot" camps for at-risk youth, and group homes for disabled people who need help but not nursing [1].

For an investor, the headline at this level is identical to its child: a small, deeply fragmented, and overwhelmingly government-funded corner of the care economy, roughly $9.2 billion in measured private receipts [2], paid for almost entirely by Medicaid, federal foster-care dollars (Title IV-E of the Social Security Act), and state and county child-welfare and juvenile-justice contracts. Demand is durable; revenue is rate-capped, politically exposed, and lately under intense abuse-and-neglect scrutiny.

2. What's inside — and why this level equals its one child

NAICS is a nested hierarchy: sector (2-digit) → subsector (3-digit) → industry group (4-digit) → industry (5-digit) → national industry (6-digit). Most 4-digit industry groups split into several 5-digit children. 6239 is not one of them: it has a single child, 62399, which itself has a single child, 623990. So the 4-digit, 5-digit, and 6-digit lines cover the same establishments. There is no aggregation happening here: no sibling industries to sum, no cross-child mix to weigh. The 6239 rollup figure is the 62399 figure is the 623990 figure.

The industry's exclusions are residential intellectual/developmental-disability care → 6232 / 623210; residential mental-health and substance-abuse care → 6232 / 623220; assisted living → 623312; skilled nursing → 623110; emergency shelters → 624221; and private prisons → 561210 [1].

3. Size (this level's figures)

Federal statistics for NAICS 6239 (our ground-truth figures). Because the level has one child, these equal the 62399 / 623990 totals.

Payroll (~$5.2 billion) is more than half of receipts (~$9.2 billion), confirming a labor business, not a capital-intensive one; the average establishment has about 20 employees (118,478 ÷ 5,988), i.e. mostly small group homes rather than large institutions. The average firm books only about $2.5 million in receipts, well under the U.S. Small Business Administration's (SBA) $16 million small-business size standard for this code [4].

Undercount caveat. County Business Patterns covers only establishments with paid employees; it excludes the self-employed, nonemployer businesses, and most government employment [5]. The Economic Census generally excludes government-owned establishments even when their activity mirrors a covered private industry [6]. So government-run juvenile group homes and public children's homes sit outside these totals, and paid individual foster families, who aren't "establishments" at all, are outside scope entirely. The societal spend on housing these populations is materially larger than $9.2 billion. The Herfindahl-Hirschman Index (HHI, the standard market-concentration measure) is suppressed in the federal data for this code, so no value is stated [2]. Do not stitch these numbers into a single margin: receipts and concentration are 2022 Economic Census, payroll and employment are 2023 County Business Patterns, and payroll is not revenue [2][3].

4. Investable universe (where value concentrates)

With one child, value concentrates exactly where it does in 62399: there is no pure-play public company whose reported revenue maps cleanly to this code. Listed exposure is indirect and small, residential-reentry (halfway-house) segments inside prison operators GEO Group (GEO) and CoreCivic (CXW), and youth residential beds inside behavioral-health chains Acadia Healthcare (ACHC) and Universal Health Services (UHS) that mostly sit in adjacent NAICS codes [9][11][12][13]. The real operators are private: nonprofits (Boys Town, Devereux) and government run most of it, with for-profit, increasingly private-equity-backed, roll-ups (Sevita, Embark Behavioral Health, Family Help & Wellness) owning the rest [8][15][16][18].

5. How the money works

Owners earn like a hotel with a captive, publicly-funded clientele: revenue = licensed beds × occupancy (census) × per-diem rate, minus a labor-heavy cost base. Almost all revenue is public (Medicaid, including the children's EPSDT benefit, Early and Periodic Screening, Diagnostic and Treatment; Title IV-E; and state/county contracts). The per-diem gradient is the whole game: a child in an ordinary foster home draws roughly ~$30/day, but the same child in a residential treatment center can draw from ~$275 to more than $800/day [8][17]. Because payroll exceeds half of receipts [2][3], profitability turns on two levers, labor cost and census, and administratively set rates mean operators can't simply raise prices to cover wage inflation.

6. Demand drivers

The same forces apply as for the child: a shortage of foster families that pushes systems toward congregate care; the youth behavioral-health crisis [12]; Medicaid's tilt toward community living [19]; Medicaid rate adequacy and state budgets [19]; and child-welfare/juvenile-justice caseloads and policy. The Family First Prevention Services Act of 2018 (FFPSA) cut off federal Title IV-E reimbursement after 14 days for group placements that aren't an accredited Qualified Residential Treatment Program (QRTP) [17][18], yet the congregate-foster population has held around 40,000, so underlying need is sticky and relatively defensive [18].

7. Regulation

A heavily regulated, license-gated business with a rising regulatory temperature. There is no single national license: state licensing is the license to exist and can be suspended or revoked; federal funding rules (Title IV-E, FFPSA/QRTP, Medicaid EPSDT, and Home- and Community-Based Services standards from the Centers for Medicare & Medicaid Services, CMS) shape the economics [17][19]; and oversight scrutiny is intense: the U.S. Senate Finance Committee's June 2024 "Warehouses of Neglect" investigation and a subsequent Department of Justice (DOJ) referral put the for-profit model under direct pressure [20][21].

8. Consolidation

Extraordinarily fragmented: the largest four firms hold just 6.3% of revenue, the top eight 9%, the top 20 15.3%, and even the top 50 only 25.8% [2], a textbook roll-up-ready structure with 3,601 firms and no dominant player. Competition is fundamentally local (licenses, referrals, staff, contracts, community acceptance), while private-equity buyers consolidate for scale economics and per-diem arbitrage. The result is a barbell: a stable nonprofit/government core, a churn of small local operators, and an aggressive for-profit consolidation layer drawing most of the capital and most of the criticism [8][18][7].

9. Risks

Identical to the child's: reimbursement risk (administratively set Medicaid/Title IV-E rates, FFPSA funding limits, 2025 Medicaid tightening) [17][22]; labor risk (a chronic direct-care worker shortage, with pay effectively capped by Medicaid rates) [23]; quality/safety/litigation risk (abuse, restraints, license loss, which can also strand the underlying real estate) [8][20]; occupancy/policy-shift risk; referral and payer concentration; leverage risk from PE ownership and sale-leasebacks; and acute ESG and headline risk in one of the most reputationally charged corners of the care economy [8][7].

10. How to invest & outlook

Public markets offer no clean entry; use listed names (GEO, CXW, ACHC, UHS) only as exposure to selected subsegments, valuing the relevant segment on enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization), free-cash-flow yield, leverage, and payer mix rather than treating diversified revenue as 6239 exposure [9][11][12][13]. Private markets are where the industry actually is: acquiring or building licensed multi-site platforms, private credit against contracted cash flows, owning the real estate leased to a licensed operator, or supplying staffing/compliance technology [8][18].

Outlook: demand is structurally durable but revenue is rate-capped while costs are squeezed by a direct-care labor shortage; escalating oversight raises compliance cost and regulatory risk for the for-profit model even as capital keeps flowing into roll-ups. Returns will be highly operator-specific.

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Sources

1. U.S. Census Bureau, 2022 NAICS Definition — 623990 Other Residential Care Facilities (definition, illustrative examples, cross-references), 2022. https://www.census.gov/naics/?chart=2022&details=623990&input=623990
2. U.S. Census Bureau, 2022 Economic Census — receipts, firm counts, and concentration ratios (CR4/CR8/CR20/CR50; HHI suppressed), NAICS 623990, 2022. https://api.census.gov/data/2022/ecnsize.html
3. U.S. Census Bureau, County Business Patterns: 2023 — establishments, employment, annual and first-quarter payroll, NAICS 623990, 2023. https://www.census.gov/data/datasets/2023/econ/cbp/2023-cbp.html
4. U.S. Small Business Administration, Table of Size Standards, 2023. https://www.sba.gov/document/support-table-size-standards
5. U.S. Census Bureau, County Business Patterns Methodology (coverage; excludes nonemployers and most government), 2026. https://www.census.gov/programs-surveys/cbp/technical-documentation/methodology.html
6. U.S. Census Bureau, Understanding NAICS (Economic Census exclusion of government-owned establishments), 2022. https://www.census.gov/programs-surveys/economic-census/year/2022/guidance/understanding-naics.html
7. Private Equity Stakeholder Project, The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth, 2022. https://pestakeholder.org/reports/the-kids-are-not-alright-how-private-equity-profits-off-of-behavioral-health-services-for-vulnerable-and-at-risk-youth/
8. Wikipedia, GEO Group (GEO Care / youth-services divestiture to Abraxas), 2025. https://en.wikipedia.org/wiki/GEO_Group
9. CoreCivic, Inc., Form 10-K / 2024 Annual Report — CoreCivic Community segment (reentry centers, beds, occupancy, revenue), 2024. https://www.sec.gov/Archives/edgar/data/1070985/000114036125011095/ny20038715x3_ars.pdf
10. Acadia Healthcare Company, Form 10-K for Fiscal Year 2025 (277 behavioral-health facilities, 12,500+ beds), 2026. https://www.sec.gov/Archives/edgar/data/1520697/000119312526078266/achc-20251231.htm
11. Universal Health Services, Form 10-K for Fiscal Year 2025, 2026. https://www.sec.gov/Archives/edgar/data/352915/000119312526071676/uhs-20251231.htm
12. Boys Town, About Boys Town and Residential Care, 2025. https://www.boystown.org/about
13. Wikipedia, Devereux Foundation (total revenue ~$494 million, 2024), 2025. https://en.wikipedia.org/wiki/Devereux_Foundation
14. Unsilenced, The Troubled Teen Industry — What Is TTI? (Sequel revenue, per-diem rates, public-funding share), 2025. https://www.unsilenced.org/the-industry/
15. Stateline, Private equity snaps up disability services, challenging state regulators (Sevita/National Mentor ownership and scale), 2025. https://stateline.org/2025/05/16/private-equity-snaps-up-disability-services-challenging-state-regulators/
16. Child Trends, The Number of Older Youth in Congregate Foster Care Decreased in 2024, 2025. https://www.childtrends.org/publications/older-youth-congregate-foster-care-decreased-2024
17. Congressional Research Service, Family First Prevention Services Act, Insight IN10858. https://www.congress.gov/crs-product/IN10858
18. Child Welfare Monitor, Surprise, surprise! Family First has not reduced the use of congregate care! (congregate population held ~40,000; QRTP 14-day rule), 2026. https://childwelfaremonitor.org/2026/03/24/surprise-surprise-family-first-has-not-reduced-the-use-of-congregate-care/
19. Centers for Medicare & Medicaid Services, Home and Community-Based Services Provisions / 2024 Medicaid Access Final Rule, 2024. https://www.medicaid.gov/medicaid/access-care/home-and-community-based-services-provisions
20. U.S. Senate Committee on Finance, Wyden Investigation Exposes Systemic Taxpayer-Funded Child Abuse and Neglect in Youth Residential Treatment Facilities ("Warehouses of Neglect"), June 12, 2024. https://www.finance.senate.gov/chairmans-news/wyden-investigation-exposes-systemic-taxpayer-funded-child-abuse-and-neglect-in-youth-residential-treatment-facilities
21. U.S. Senate Committee on Finance, Wyden Asks DOJ to Investigate Medicaid Fraud by Youth Residential Treatment Facilities and Potential Civil Rights Violations by States, October 9, 2024. https://www.finance.senate.gov/chairmans-news/wyden-asks-doj-to-investigate-medicaid-fraud-by-youth-residential-treatment-facilities-and-potential-civil-rights-violations-by-states
22. KFF, Payment Rates for Medicaid Home Care Ahead of the 2025 Reconciliation Law, 2025. https://www.kff.org/medicaid/payment-rates-for-medicaid-home-care-ahead-of-the-2025-reconciliation-law/
23. Home Health Care News, For Patients With Intellectual And Developmental Disabilities, Access To HCBS Remains Grim (direct-care worker shortage; provider staffing survey), 2024. https://homehealthcarenews.com/2024/03/for-patients-with-intellectual-and-developmental-disabilities-access-to-hcbs-remains-grim/