The COVID-19 pandemic has spurred an increasingly urgent conversation among political leaders, policymakers, and leaders in early care and education (ECE) about the need for systemic change to ensure the economic survival of the sector, which is vital to a functioning economy.

To add to the public discussion now taking place, the Institute for Early Education Leadership and Innovation convened a series of webinars, “Reimagining Stronger and More Equitable Systems of Early Care and Education.” The three-part series explored ideas and innovations for solving some of the persistent obstacles to expanding affordable access to quality early care and education.

In our first webinar, titled “The Vision for Reinventing Child Care – Where Are We Now and Where Are We Going?” we discussed business strategies for improving the financial health of ECE programs. More than 300 teachers, administrators, and family child care owners tuned in for the session, which featured Louise Stoney, co-founder of Opportunities Exchange, a national leader in developing business strategies that sustain ECE programs and improve child outcomes, Stoney’s Opportunities Exchange colleagues Sharon Easterling and Amy Friedlander, and Leadership Institute Executive Director Anne Douglass.

Stoney presented easy ways to improve and streamline ECE business practices that only one-third of providers take advantage of. She also offered examples of innovations taking place around the country.

The foundation for financial sustainability, she said, was business leadership, describing it as “the missing link we have not focused on.” She described five tools of business administration that could help reinvent ECE: automation and business coaching, administrative scale, de-centralized services, strategic cost modeling and rate-setting, and real-time supply and demand data.

As an example of how business leadership can help ECE providers streamline operations and strengthen their center’s financial viability, Stoney described how a child care center that used Opportunities Exchange’s model went from spending 48 percent of its budget on teachers to spending 62 percent in the span of a year without bringing in additional revenue. By using an automated Child Care Management System (CCMS), the center dramatically simplified its billing, parent engagement, scheduling, and other daily operating tasks of operating child care business. It also joined a Shared Services Alliance—a membership organization through which ECE providers band together to share costs of administrative services like accounting, purchasing, marketing, and other expertise and resources. Those two innovations freed up 17 hours a week, saving money that it redirected to improving program quality and increasing teacher compensation and benefits.

Stoney also discussed “de-centralized services” as one way to meet challenges posed by COVID-19-related drops in enrollment. Some state now license child care “microcenters.” These one-room family childcare-center hybrids are located in businesses, hospitals, private schools, YMCAs and other community-based organizations that offer the space for free in exchange for affordable child care slots for their employees. Providers, in turn, use a Shared Services Alliance to manage administrative functions such as hiring staff and billing.

Strategic cost modeling is another way to strengthen the financial health of ECE providers, Stoney said. She cautioned that setting public reimbursements rates for ECE programs based on market rates was deeply flawed, and yet it’s the model currently used. For example, market rate reimbursement in Massachusetts covers the costs of care with a profit in urban areas, but leaves providers operating in rural regions in the red.

Instead, data about program size, enrollment levels, age-groups being served, and true administrative costs must be factored in. Stoney noted however, that states must get permission from the federal government to set reimbursement rates based on factors other than market rates.

You can watch the recorded webinar here.

You can also watch short clips featuring highlights from the video:

• What Are Shared Services? 
• Access to Automation Is an Equity Issue
• Market Rate Inequities
• How Microcenters Can Transform the Industry

A PDF of the slides from the webinar is available here.