In 2016, 1.37 million children received subsidies under the U.S. Department of Health and Human Services’ $8.7 billion Child Care Development Fund, though care is often low-quality. One way a state can incentivize providers to offer higher quality care is by providing larger child care subsidies to higher quality providers through a tiered reimbursement system. This research used a sequential explanatory equal status mixed method design to answer the question, Does Maryland’s tiered reimbursement system incentivize child care providers to attain a rating on Maryland’s Quality Rating and Improvement System (QRIS) that results in a higher reimbursement rate?

The first stage of research consisted of multilevel logistic regressions to determine the association between child care centers’ and family child care providers’ reliance on subsidy payments and whether the provider was rated highly enough on Maryland’s QRIS (called Maryland EXCELS) to receive an incentive payment. The regressions used administrative data from the Maryland State Department of Education and demographic data from the U.S. Census. The analyses included all providers in Maryland that received payments from Maryland’s Child Care Subsidy Program in January 2018. The second stage of research consisted of 14 interviews with child care center directors across five counties to understand how they made decisions about which EXCELS rating to attain, how tiered reimbursements factored into their decisions, and general experiences with EXCELS.

Results from my quantitative research found that for both child care centers and family providers, a greater subsidy density (i.e., number of children receiving a child care subsidy divided by the provider’s licensed capacity) was associated with a greater likelihood of a provider being rated higher quality (level 3 or higher in EXCELS) and receiving a tiered child care payment. However, results of my qualitative research found that few center directors reported that EXCELS payments factored into their decision on what EXCELS level to reach and none of the centers were singularly motivated by the bonuses. Rather, directors reported being intrinsically motivated to improve EXCELS ratings or motivated by technical assistance providers. Challenges to improving EXCELS ratings included a lack of capacity and difficulty finding qualified staff.