4.4 Payment Practices to Providers

Lead Agencies must use subsidy payment practices that reflect practices that are generally accepted in the private pay child care market. The Lead Agency must ensure timeliness of payment to child care providers by paying in advance or at the beginning of delivery of child care services. Lead Agencies must also support the fixed cost of child care services based on paying by the child’s authorized enrollment, or if impracticable, an alternative approach that will not undermine the stability of child care programs as justified and approved through this Plan. Lead Agencies must also (1) pay providers based on established part-time or full-time rates rather than paying for hours of service or smaller increments of time, and (2) pay for reasonable, mandatory registration fees that the provider charges to private-paying parents. These policies apply to all provider types unless the Lead Agency can demonstrate that in limited circumstances the policies would not be considered generally-accepted payment practices. In addition, Lead Agencies must ensure that child care providers receive payment for any services in accordance with a payment agreement or an authorization for services, ensure that child care providers receive prompt notice of changes to a family’s eligibility status that could impact payment, and have timely appeal and resolution processes for any payment inaccuracies and disputes. 4.4.1 Prospective and enrollment-based payment practices Lead Agencies must use payment practices for all CCDF child care providers that reflect generally- accepted payment practices of providers serving private-pay families, including paying providers in advance or at the beginning of the delivery of child care services and paying based on a child’s authorized enrollment or an alternative approach for which the Lead Agency must demonstrate paying for a child’s authorized enrollment is not practicable and it will not undermine the stability of child care programs. Lead Agencies may only use alternate approaches for subsets of provider types if they can demonstrate that prospective payments and authorized enrollment-based payment are not generally-accepted for a type of child care setting. Describe the Lead Agency payment practices for all CCDF child care providers: a. Does the Lead Agency pay all provider types prospectively (i.e., in advance of or at the beginning of the delivery of child care services)? [ ] Yes. If yes, describe: [x] No, it is not a generally-accepted payment practice for each provider type. If no, describe the provider type not paid prospectively and the data demonstrating it is not a generally-accepted payment practice for that provider type, and describe the Lead Agency’s payment practice that ensures timely payment for that provider type: We are currently implementing a planned system replacement for the Child Care Subsidy program with completion during the 2025-2027 State Plan timeframe. Once completed, we will begin paying providers prospectively. South Dakota will be requesting a waiver to allow time for the implementation of prospective payments. b. Does the Lead Agency pay based on authorized enrollment for all provider types? [x] Yes. The Lead Agency pays all providers by authorized enrollment and payment is not altered based on a child’s attendance or the number of absences a child has. [ ] No, it is not a generally-accepted practice for each provider type. If no, describe the provider types not paid by authorized enrollment, including the data showing it is not a generally-accepted payment practice for that provider type, and describe how the payment policy accounts for fixed costs: [ ] It is impracticable. Describe provider type(s) for which it is impracticable, why it is impracticable, and the alternative approach the Lead Agency uses to delink provider payments from occasional absences, including evidence that the alternative approach will not undermine the stability of child care programs, and thereby accounts for fixed costs: 4.4.2 Other payment practices Lead Agencies must (1) pay providers based on established part-time or full-time rates rather than paying for hours of service or smaller increments of time, and (2) pay for reasonable, mandatory registration fees that the provider charges to private-paying parents, unless the Lead Agency provides evidence that such practices are not generally-accepted for providers caring for children not participating in CCDF in its State or Territory. a. Does the Lead Agency pay all providers on a part-time or full-time basis (rather than paying for hours of service or smaller increments of time)? [ ] Yes. [x] No. If no, describe the policies or procedures that are different than paying on a part- time or full-time basis and the Lead Agency’s rationale for not paying on a part-time or full-time basis: The Lead Agency provides a full weekly or daily payment for providers participating in a Memorandum of Understanding serving TANF families. Providers who charge a full-time weekly rate are reimbursed for a maximum of 45 hours per week at the maximum hourly rate or reimbursed at the weekly rate as established by the program, whichever is lessor of the two. Regardless of the hours the child is in care each week, the provider receives an established daily rate or the weekly rate of reimbursement. The provider also agrees not to pass any additional costs, not covered by the Lead Agency, on to the TANF family, and have agreed to participate and follow the stipulations of the Memorandum of Understanding. CCS is currently implementing a planned system replacement for the Child Care Subsidy program with completion during the 2025-2027 State Plan timeframe. Once completed, we will begin paying providers following a weekly, enrollment-based rate structure including three levels of care need. Examples of levels are full time, part time, and least time. In the interim, due to current legacy system limitations, we reimburse providers an hourly enrollment-based rate for their authorized hours that are determined based on child care need. b. Does the Lead Agency pay for reasonable mandatory registration fees that the provider charges to private-paying parents? [ ] Yes. If yes, identify the fees the Lead Agency pays for: [x] No. If no, identify the data and how data were collected to show that paying for fees is not a generally-accepted payment practice: In South Dakota, registration fees are not generally accepted practices as only 45% of providers state they were charging a registration feed in the 2024 Market Rate Survey. c. Describe how the Lead Agency ensures that providers are paid in accordance with a written payment agreement or an authorization for services that includes, at a minimum, information regarding provider payment policies, including rates, schedules, any fees charged to providers, and the dispute-resolution process: Regulated family day care, group family and day care, informal and in-home providers complete a 'Provider Agreement for Child Care Assistance' annually which describes the provider's and the State's requirements and responsibilities while participating in the Child Care Assistance program. This Agreement includes provider policies, rate information, and schedules. There are no fees charged to providers by Child Care Services. The dispute resolution is informal initially. Any dispute in payments that is not resolved informally is conducted through the Administrative Hearing process. Any letter with continued dispute sent to a provider includes their right to due process through an Administrative Hearing. d. Describe how the Lead Agency provides prompt notice to providers regarding any changes to the family’s eligibility status that could impact payments, and such a notice is sent no later than the day that the Lead Agency becomes aware that such a change will occur: When a change occurs to the family's eligibility status that may impact payment, providers are notified the same day the change is processed either by email or mail. This includes a certificate closure, or change to eligibility dates, coverage level, or provider changes. e. Describe the Lead Agency’s timely appeal and resolution process for payment inaccuracies and disputes: When there is payment dispute, the provider is given written notice of the cause of the overpayment along with fair hearing rights. The request for a hearing must be made inwriting to the Department of Social Services, Office of Administrative Hearings, within 30 days of the notice of overpayment. f. Other. Describe any other payment practices established by the Lead Agency: NA 4.4.3 Payment practices and parent choice How do the Lead Agency’s payment practices facilitate provider participation in all categories of care? Payment practices incorporate inclusivity and coverage to facilitate provider participation: South Dakota payment rates are set at the 75th percentile, the identified federal benchmark; South Dakota allows parents to choose from licensed centers, registered family homes, as well as informal and in-home child care providers who meet certain health and safety standards, as indicated on their Child Care Assistance Application; South Dakota reimbursement rates are weighted by enrollment to account for the actual number of childcare slots rather than the number of child care providers, which helps ensure the rates consider where children are being served; Rates are calculated separately among provider types in order to allow families access to child care and their choice of provider type; and payments are issued for the full authorized entitlement regardless of temporary changes in child attendance.