LEWISTON — Sandcastle Preschool appears to be the latest casualty to the financial constraints health care systems are experiencing stemming from Medicaid reimbursement rates.

Andwell, which assumed ownership of the school a year ago, said it will end the services Thursday, putting further stress on a child care system that is suffering from a lack of capacity.

Andwell CEO Ken Albert said the shift in Medicaid funding by Congress has made it clear to him that there is no way it can hope to maintain fiscal viability into the near future. The current reimbursement structure at the federal level is not enough to maintain the program financially, along with further cuts to Medicaid that were approved.

“Since assuming management of the preschool in July 2024, the program continued operating at a financial deficit due to inadequate reimbursement structures,” Marketing and Communications Manager Bre Beaulieu said Tuesday. “Federal Medicaid policy shifts have further reduced sustainability. After a thorough year-long evaluation, there is unfortunately no financially viable path forward to keeping the program open.”

The therapeutic services, such as occupational and speech therapies, will be maintained in an outpatient setting at the company’s 710 Main St. location in Lewiston, Albert said. All outpatient therapies are being consolidated into one building.

Most of the preschool’s funding comes from federal and state dollars, along with some private pay, Beaulieu said. However, the federal reimbursement rates are not enough to financially sustain the preschool.

The preschool, with a capacity of 50, serves children ages 3-5, while also serving children with developmental challenges, according to Beaulieu. The preschool offered an inclusivity model to children, teaching them to feel empathy, understanding and acceptance for peers with different abilities and challenges.

Stephanie Gelinas founded Sandcastle Preschool more than 29 years ago in the basement of a medical building with a staff of just two.

In 1996, she began expanding her practice to add pediatric therapy services. Her goal was to better integrate children with different abilities into the classroom setting once they reached elementary school, instead of them being isolated in a special education classroom. The preschool currently resides at 72 Strawberry Ave.

The preschool closure comes at a time when Maine has seen a number of child care centers close since the start of the 2020 COVID-19 pandemic, with 175 day care operations closing permanently in roughly the first year of the pandemic. Five of those facilities were located in Lewiston and Auburn.

In 2023, about 52% of 4-year-olds in Maine were enrolled in a public pre-kindergarten program, according to data on Educate Maine’s website — a business-led advocacy organization aimed to help students become better prepared for careers after high school graduation.

Though about 85% of Maine public school districts offered a pre-K program in 2023, more than half of them had programs that operated less than 25 hours per week, according to data on Educate Maine’s website.

With approximately 69% of children under 6 in Maine coming from families where all their caregivers work, about 22% of people in Maine live in a child care desert, where there are more than three children under the age of 5 for each available childcare slot, according to Educate Maine.

Andwell has met with all parents about the decision to close the preschool and it will hold job fairs for employees not staying on with the company, along with severance packages, Albert said.

“This was an extremely difficult decision made after exploring every possible alternative,” Beaulieu said. “We remain deeply committed to serving children and families in our community and will continue to do so through our other pediatric therapy programs, skilled pediatric home health for seriously ill children, behavioral health, palliative care and hospice.”