Child welfare services currently operate in an environment characterized by increasing need for services and calls for cost containment and system reform. To survive in this environment, foster care agencies will have to reexamine their use of resources to ensure that these are used to achieve the best possible outcomes for the children in their care. The authors of this paper suggest that capitated rates represent a potentially useful approach for foster care agencies. The two aspects most relevant are capitation of funds (in which a limited reimbursement for costs is accepted in exchange for flexibility in service delivery), and service review (with the expectation that increased attention to the process of care as well as to expenditures will result in lowered costs). This paper discusses issues related to setting a capitation rate and how to estimate the maximum rate of expenditure permissible for solvency under the proposed capitation rate.