Addressing Equal Access through Market Rate Surveys and

Addressing Equal Access through Market Rate Surveys and

Addressing Equal Access through Market Rate Surveys and Alternative Methodologies Welcome! Introductions Abdihakin Abdi, Program Specialist, Office of Child Care Heather Laffler, NC Division of Child Development and Early Education Business Officer. Elizabeth Groginsky, Assistant Superintendent for Early Learning, District of Columbia, Office of the State Superintendent of Education

Nina Johnson, Senior Technical Assistance Specialist, NCECQA Jeanie Mills, Senior TTA Specialist, NCSIA Session Objectives Analyze the choices of conducting a market rate survey or alternative methodology Understand how to estimate costs, regardless of your choice Learn how other lead agencies have evaluated their choices Why Conduct a Study? A review of the Equal Access requirements

The importance of setting your own objectives Baseline Requirements Lead Agencies must base their payment rates on a valid market rate survey (that reflects variations in the cost of child care services by geographic area, type of provider, and age of child) or alternative methodology (e.g. cost estimation model). Lead Agencies must develop and conduct their study no earlier

than two years before the date of submission of the plan Alternative methodology must be submitted for advance ACF approval. Lead Agencies must make widely available detailed report with results of market rate survey or alternative methodology no later than 30 days after its completion.

Baseline Requirements (Cont.) Regardless of whether Lead Agencies conduct a market rate survey or an alternative methodology, they are required to analyze the estimated cost of care in two areas: The cost of child care providers implementation of health safety, quality, and staffing requirements The cost of higher-quality care, as defined by the Lead Agency using a quality rating and improvement system or other system of quality indicators, at each level of quality Examples of Other Objectives

Realigning geographic or administrative sub-markets or remote, non-contiguous areas Obtaining information needed for evaluating QRIS rate differentials Obtaining rate and supply information on specific age groups or special populations Changing payment rate structure or units of care, i.e., going from an hourly to a weekly payment rate Whats the Difference? Defining and comparing market rate surveys and alternative methodologies Benefits/limitations of each method

Advantages of understanding both the cost of care and the prices charged Market Rate Surveys Benefits and Limitations Benefits Limitations Provides insight into provider behavior Collecting data is easier

Only measures price Provides clear information that can be used to demonstrate equal access Possibility of insufficient market information Prices may reflect parents inability to pay in certain markets Ensuring valid and reliable information

Cost Studies Benefits and Limitations Benefits Sheds light on differences between prices and costs Shows what drives costs within submarkets Limitations Ensuring valid and reliable data and a representative sample (survey and

modeling) More time-consuming and costly Providers reluctant to share information related to costs Defining your Markets and Sub-Markets Cost Estimating Methods Benefits and limitations in using the PCQC or other calculators spreadsheets rough estimates

Proposed Steps for Estimating Costs Use available, quality data and consult with advisory committee Use cost drivers for base and quality-level care Estimate average cost per classroom or program Calculate per-child cost by age group Other Guidance Consider results of study when setting rates - - take the long view

Consider additional provider supports North Carolinas Review of Child Care Market Rates and Cost Estimates Why Conduct a Pilot? Legislative Mandate State and Federal (suggestion) To research other available practices and procedures used to set child care market rates To determine if collecting additional cost data could inform and improve market rate setting

for child care Methods and Procedures Used to Collect Cost Data Used a stratified sample of 106 child care centers and family child care homes across NC Sample was based on geographic/regional enrollment and distribution of star ratings for facilities across the state Data collected primarily by the CCR&Rs using telephone interviews and face-to-face interviews on-site Some child care providers mailed in self-completed surveys Data was collected on facility characteristics, enrollment, tuition and funding, staffing and staffing expenses, and additional non-personnel

operating cost Lessons Learned Higher rates of refusal than are typically seen with the traditional market rate studies Respondents were reluctant to share personnel cost data with CCR&Rs preferred third party, if they would participate at all Regardless of data collection method used, numerous follow-up contacts were required to obtain cost data versus rates charged and enrollment (typical MRS)

Lessons Learned Pilot project was NOT intended to set/replace typical MRS for ratesetting, but to test the PROCESS on a much smaller scale, related to using the online Cost of Quality tool (or a similar set of questions) and how NC providers would respond Collecting data on cost of care still does not necessarily resolve the issue of cost v. cost of QUALITY Parents ability to pay, local economy, other factors also play a very large role in what providers are able to spend and be reimbursed/charge for their services Pilot Study: Results Part One Part One: Review of research on setting child care market rates

The review of traditional market rate studies yielded two recommendations to potentially improve North Carolinas future traditional market rate studies. 1. Study how geographic clustering of counties might simplify rate structures and setting 2. Investigate how rates differ using the total number of slots available in a child care center or family child care home v. the number of filled slots when calculating the market rate, to create a more accurate reflection of access and cost

Pilot Study: Results Part Two Part Two: Cost Estimation Study to collect additional cost-of-operating data to use in establishing child care market rates More detailed cost data could help in validating traditional market rate study and holds promise need more data points and study to fully confirm 1. Additional cost data can help inform other policies that impact oversight of child care programs 2. Data is more complete and accurate when collected by a third party experienced in data

collection procedures and techniques Next Steps Conduct the 2017 North Carolina Child Care MRS in October 2017 beginning contract work now Census of all providers for the traditional survey Asking for September and July 2017 enrollment data and 2017 estimated annual cost data. Providers who have at least 3 stars and 3 or more children enrolled will be asked to complete section two - detailed costs of operating program

What are we doing differently? Changes planned for the 2017 Market Rate Survey: Some cost data is being collected within the standard Market Rate Study questions. Detailed cost data being collected by phone. Questions used in the pilot have been refined to be more clear and to capture more detailed data on classroom age groups Added a supplement to the typical MRS to collect more details on costs for salary and non-salary actual expenses (70% of overall cost) Testing to see if remaining overhead costs (30%) can be estimated or generalized based on type/location/other? Financing Child Care in the

District of Columbia: Challenges and Opportunities August 8, 2017 Key Facts Early Care and Education (ECE) is expensive and public dollars are very limited The cost of delivering ECE can vary widely, based on ages/special needs of children served, quality standards, program size and enrollment levels The Districts commitment to universal pre-K has helped families with 3-4 yr. olds, but has had unintended consequences on the cost and availability of infant-toddler

care High-quality programs struggle when funding is linked to market prices, especially in low-income neighborhoods Rate-setting Challenges Market Rate Surveys measure the price of care Child care prices are typically based on what families can afford or are willing to pay, and are unlikely to vary by quality level Child care price is only one data point; accurate revenue projections require more detail Cost modeling makes it possible to understand program costs and market forces

Both rate surveys and cost modeling can inform rates The Iron Triangle of ECE Finance Ensure full enrollment every day, in every classroom Collect tuition and fees in full and on-time Revenue covers perchild cost (tuition, fees + 3rd party funding) What is Cost Modeling? Methodology to estimate the likely cost of delivering ECE,

from the provider perspective. Creates a hypothetical budget, based on required standards (QRIS and licensing). Can explore impact of program size, ages of children served, enrollment, bad debt, etc. Can demonstrate the impact of funding from multiple sources. Nationally Endorsed Methodology The Cost Modeling methodology was developed by national experts Anne Mitchell and Andrew Brodsky. Endorsed by the U.S. Department of Health and Human Services, Administration for Children and Families, Office of

Child Care, which supported the an online development of the tool - Provider Cost of Quality Calculator (PCQC) https://www.ecequalitycalculator.com/. Increasingly used by states to inform rates. How Does Cost Modeling Work? Creates a hypothetical budget for a provider at each quality level, with initial assumptions about: Number of classrooms and age mix Group sizes and ratios (based on licensing) QRIS levels (increased staff + higher wages and benefits at Gold, Silver, Bronze) Enrollment levels

Fee collectability Staffing and salaries Non-personnel expenses Revenue sources (public and private) How the Model Can be Used Enables exploration of how various factors in addition to the CCDF reimbursement rate can affect profit or loss, e.g.: Increased scale Income mix of families served Enrollment levels Fee collectability Subsidy policy changes

Additional revenue sources, e.g. Pre-K Enhancement, CACFP Lessons from Cost Modeling Infants and toddlers are the most expensive Quality costs Enrollment matters for financial sustainability Size matters small centers that serve primarily infants and

toddlers struggle financially Age matters programs that serve mixed ages of children are financially stronger District public universal pre-K is a game-changer and requires strategic thinking about infants and toddlers Infant/Toddler Care is Most Expensive Chart 1 Net Revenue: 4 classrooms at a Gold-level Center $200,000 $150,556

Net Revenue $100,000 $0 ($100,000) ($143,669) ($200,000) ($220,543) ($300,000) Mixed ages no PreK

Only infants/toddlers Age Mix Mixed ages with PreK Quality Costs Chart 2 Net Revenue: 4 Classrooms at 3 QRIS Levels and with PreK $200,000 $150,556 Net Revenue

$100,000 $0 ($100,000) ($59,806) ($66,845) ($143,669)

($100,680) ($131,692) ($200,000) ($220,543) Age Mix: ($300,000) Bronze Silver Mixed ages

Gold Only infants/toddlers Gold w/ PreK Full Enrollment Matters Average Cost Per Child: Effect of Enrollment Rates and Size Gold -Level Center with Mixed Ages $19,830 $18,932 $18,688

$17,747 $16,833 $15,821 Small Center (56 children) Large Center (168 children) 98% Enrollment 85% Enrollment

77% Enrollment Multiple Revenue Sources are Essential The Child and Adult Care Food Program (CACFP) is a federal funding stream that is available to all child care providers who serve low-income children. A small child care center (that serves only 56 children) could receive as much as $65,000 in additional revenue from the CACFP. What About Family Child Care? The same cost factors apply in FCC

however, enrollment and fee collection challenges are more significant cost drivers. Gold Level Homes Impact of Market Forces $35,720 $15,529 $3,894

Net Revenue ($6,976) Small CDH:3 infants/3 toddlers Expanded CDH: 3 inf/ 3 todd/ 3 3's Lessons from Cost Modeling

Infants and toddlers are the most expensive Quality costs Enrollment matters for financial sustainability Program size matters small centers that serve primarily infants and toddlers may struggle financially. Age matters programs that serve mixed ages of children are financially stronger. District public universal pre-K is a game-changer and requires strategic thinking about infants and toddlers. Lets Talk About It

Contact Information Heather Laffler: [email protected] Elizabeth Groginsky: [email protected] Nina Johnson: [email protected] Jeanie Mills: [email protected] Abdihakin Abdi: [email protected]

State Cost Analyses Arkansas: University of Arkansas Medical Sciences. (2014). Making quality ends meet. Retrieved from http://humanservices.arkansas.gov/dccece/dccece_documents/QRIS%20Making% 20Quality%20Ends%20Meet-highlights%20-%202014.pdf Delaware: Mitchell, A. W. (2013). Modeling quality costs for Delaware Stars: Interim report on program costs of quality in centers [Unpublished manuscript].

Retrieved from the Alliance for Early Childhood Finance website: http://www.earlychildhoodfinance.org/dev/wp-content/uploads/2016/03/DE-Cost -of-Quality-Study-Centers-Final-2013-07.pdf District of Columbia: District of Columbia Office of the State Superintendent of Education. (2016). Modeling the cost of child care in the District of Columbia. Retrieved from http://osse.dc.gov/sites/default/files/dc/sites/osse/publication/attachments/Mod eling%20the%20Cost%20of%20Child%20Care%20in%20the%20District%20of%20C olumbia%20-%202016_0.pdf State Cost Analyses

North Carolina: The Center for Urban Affairs and Community Services, North Carolina State University. (2017). Study Child Care Subsidy Rate Setting. Retrieved from http://www.ncga.state.nc.us/documentsites/committees/JLEOC/Reports%20Receiv ed/2017%20Reports%20Received/Study%20Child%20Care%20Subsidy%20Rate%20 Setting.pdf . North Carolina: The Center for Urban Affairs and Community Services, North Carolina State University. (2017). Study Costs and Effectiveness Associated with NC

Pre-K Slots. Retrieved from http://buildthefoundation.org/wp-content/uploads/2017/02/Costs-Associated-wit h-NC-PreK-Study.pdf . Ohio: GroundWork. (2016). The dollars and cents of early learning: Investing in success: A summary of findings from groundWork's Early Childhood Financing Project. Retrieved from the Alliance for Early Childhood Finance website: http://www.earlychildhoodfinance.org/dev/wp-content/uploads/2016/03/Dollarsand-Cents-FINAL-031416.pdf State Cost Analyses

Rhode Island: Mitchell, A. W. (2013). The cost of quality early learning in Rhode Island: Interim report. Providence, RI: Rhode Island Early Learning Council. Retrieved from http://qrisnetwork.org/sites/all/files/resources_state/[email protected] rg/2014-02-14%2013:47/The%20Cost%20of%20Quality%20Early%20Learning%20i n%20Rhode%20Island%20%28December%202013%20-%20Revised%20February% 202014%29.pdf . Tarrant and Dallas Counties, Texas: Mitchell, A. W. (2017). The cost of quality child care study: A community release and recommendations. Workforce Solutions for

Tarrant County and Workforce Solutions Greater Dallas County. Retrieved from https://del.wa.gov/sites/default/files/imported/publications/elac-qris/docs/Cost_o f_Quality_Mitchell_2013.pdf Washington: Mitchell, A. W. (2013). Modeling the cost of quality in Early Achievers centers and family child care. Retrieved from http://del.wa.gov/publications/elac-qris/docs/Cost_of_Quality_Mitchell_2013.pdf Additional Resources Alliance for Early Childhood Finance. (2010). Lessons from cost modeling: The link between ECE business management and program quality. Retrieved from

http://www.earlychildhoodfinance.org/downloads/2010/Lessons%20from %20Cost%20Modeling7.27.10.pdf Caronongan, P., Kirby, G., Boller, K., Modlin, E. L., & Lyskawa, J. (2016). Assessing the implementation and cost of high quality early care and education: A review of the literature. (OPRE Report 2016-31). Retrieved from http://www.acf.hhs.gov/sites/default/files/opre/ece_ichq_lit_review_final _508compliant.pdf Grossman, J., Lind, C., Hayes, C. D., McMaken, J., & Gersick, A. (2009). The cost of quality out-of-school time programs. Philadelphia: Public/Private

Ventures. Retrieved from http://www.wallacefoundation.org/knowledge-center/Pages/The-Cost-ofQuality-of-Out-of-School-Time-Programs.aspx Additional Resources National Center on Child Care Quality Improvement. (2014). Increasing

quality in early care and education programs: Effects on expenses and revenues. Retrieved from https://childcareta.acf.hhs.gov/sites/default/files/public/240_1411_pcqc_i ncrease_quality_final.pdf National Center on Child Care Quality Improvement. (2014). Early care and education program characteristics: Effects on expenses and revenues. Retrieved from https://childcareta.acf.hhs.gov/sites/default/files/public/241_1411_pcqc_ ece_characteristics_final.pdf Oregon State University Family Policy Program, Oregon Child Care Research Partnership. (2008). Study of Market Prices: Validating Child Care Market Rate Surveys. Retrieved from http://health.oregonstate.edu/sites/health.oregonstate.edu/files/sbhs/pd

f/Validity-Study-FINAL-1-27-09.pdf

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