Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (September 2010)
78 slides from Molina Healthcare's investor day presentation, Sep 14, 2010
Slide 1: Investor Day 2010 – September 14, 2010
Investor Day 2010B September 14, 2010
Slide 2: Cautionary Statement
2 Cautionary Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This slide presentation, as well as our accompanying oral remarks, contain numerous “forward-looking statements” regarding our operations for 2010 and subsequent fiscal years, the expected impact
Slide 3: Agenda
Agenda Time Topic Speaker 12:30pm-12:35pm Opening Remarks Juan José Orellana, VP Investor Relations J. Mario Molina, MD, Chief Executive Officer (video) 12:35pm-1:10pm Business Overview John Molina, Chief Financial Officer 1:10pm-1:30pm Panel 1 Q&A 1:30pm-1:40pm Coffee Break 1:40pm-2:15pm Operationa
Slide 4: Business Overview
Business Overview John Molina Chief Financial Officer
Slide 5: Who We Are
Fee-based fiscal agent services, business process outsourcing, and care and utilization management Non-risk, fee business with higher margins and no regulatory capital requirement Who We Are 5 No other company in the Medicaid space can do all three Medicaid Managed Care Medicaid Health Information M
Slide 6: Our Strategy
6 Our Strategy 2. Leverage our core business: Strengthen operational performance Leverage group scale and competence 1. Expand the business: Increased market penetration in existing markets Strategic acquisitions Entry into new markets or programs (risk & fee based) (Gp:) 3. Strive for operational e
Slide 7: Business Footprint
Business Footprint 7 Managed care Fiscal intermediary The systems being designed by Molina Medicaid Solutions for the state of Maine went “live” on September 1, 2010. Molina Healthcare closed the Abri acquisition in Wisconsin on September 1, 2010. Managed Care Members as of 6/30/2010, except WI enro
Slide 8: Second Quarter Results
8 Second Quarter Results Earnings per diluted share of $0.41Premium revenues of $977M, up 6% over 2nd quarter 2009 Operating income of $21M, up 9% over 2nd quarter 2009 Quarterly cash provided by operating activities of $52M Includes May and June results for Molina Medicaid Solutions 130,000 new mem
Slide 9: Proven Expansion Capabilities
Proven Expansion Capabilities 9 “Greenfield” California Florida Ohio Texas Medicare Managed Care Acquisitions California Florida Michigan Missouri New Mexico Texas Washington Wisconsin Unisys HIM (Florida, Idaho, Louisiana, Maine, New Jersey, West Virginia) MMIS Market Entry California Washington Vi
Slide 10: Geographic Diversification
Geographic Diversification 10 Molina enters 5 new states through its acquisition of Unisys HIM, and Wisconsin through its acquisition of Abri Health Plan. Molina acquires Mercy Care Plus and begins operations in Missouri as Molina Healthcare of Missouri Molina begins serving delivering healthcare th
Slide 11: Health Plan Update
Health Plan Update aL MOLINA. HEALTHCARE
Slide 12: Business Snapshot – Health Plans
12 Business Snapshot – Health Plans 12 Health Plan Markets and members served – Q2 2010 Washington 346,000 California 348,000 New Mexico 93,000 Utah 77,000 Texas 42,000 Missouri 78,000 Michigan 226,000 Ohio 234,000 Florida 54,000 Managed care membership growth (in thousands) Managed care membership
Slide 13: New Contracts for Texas
13 New Contracts for Texas 13 CHIP RSA Contract began September 1, 2010˜ 64,000 members already enrolled Tentative STAR+PLUS contract award in the Dallas Service Area (7 counties) Contract effective Q1 2011 Molina Healthcare of Texas Medicaid Service Area STAR+PLUS Dallas service area Collin Dallas
Slide 14: Molina Enters Wisconsin Medicaid Market
Molina Enters Wisconsin Medicaid Market Molina Healthcare closed the Abri Health Plan acquisition in Wisconsin on September 1, 2010 Abri provides entry into a new market Contributes to revenue diversification Platform for enrollment growth in Southeast Wisconsin (250K eligibles) Highly fragmented Me
Slide 15: Trends in Medicaid Managed Care
Trends in Medicaid Managed Care 15 ABD expansion State budgets under pressure Growth in populations that are harder to manage Consolidation Preparation for Healthcare Reform (2014)
Slide 16: Getting Ready for 2014
Getting Ready for 2014 ee . BRAMOHNG
Slide 17: Healthcare Reform Will Drive Significant Growth
Healthcare Reform Will Drive Significant Growth 17 59M 2014-2018 2010 2019 16M 75M Medicaid Expansion Embarking on one of the biggest Medicaid expansions in years – the Patient Protection & Affordable Care Act (PPACA) raises eligibility to 133% of the federal poverty level in 2014 Estimated Medicaid
Slide 18: Industry Level Implications
Industry Level Implications 18 Accelerated Enrollment Growth Provider Capacity Constraints 2 Eligibility & Exchange Coordination Rising Medicaid Expenditures Medicaid population has grown by 1.7% in the last 3 years, but it is expected to grow by 27% between 2014-2019. Only 30 percent of US doctors
Slide 19: Medicaid Highlights: PPACA Implementation
Medicaid Highlights: PPACA Implementation 19 1 Source: Excerpts from: Affordable healthcare for America. Committees on Ways & Means, Energy and Commerce, and Education & Labor . Aprill 2, 2010 2010 2011 2012 2013 2014-2018 2019+ Medicaid Changes at a Glance Passage of comprehensive health reform int
Slide 20: Health Status
Health Status 20 Many uninsured adults at or below 133% FPL face health problems that may worsen due to lack of coverage. *Among those with a chronic condition. Source: Kaiser Family Foundation, “Expanding Medicaid: Coverage for Low-Income Adults under Health Reform,” February 2010.
Slide 21: Where Do the New Medicaid Eligibles Reside?
Where Do the New Medicaid Eligibles Reside? 21 Molina is strategically positioned to serve the newly eligible, as a majority of them reside in states in which Molina currently operates. Source: Kaiser Family Foundation, “Expanding Medicaid: Coverage for Low-Income Adults under Health Reform,” Februa
Slide 22: Managed Care Opportunity in 2014
Managed Care Opportunity in 2014 22 Health care reform will add an additional 16M lives to Medicaid program. Assuming Molina maintains its market share in existing markets, this represents a potential revenue expansion of approximately $1.4 billion. Please refer to the Company’s cautionary statement
Slide 23: Alignment of Reform Requirements
Alignment of Reform Requirements 30 year focus on government-sponsored healthcare programs for low income families and individuals Experience in highly regulated local environments History of transparency Direct Delivery capability Located in key expansion states (CA, FL, TX) Long history of arrangi
Slide 24: Areas of Uncertainty
Areas of Uncertainty 24 ExchangesRedetermination of eligibilityProvider payments (Medicaid @ Medicare Rates)Federalization of MedicaidUniformity/Regionalization of MMSPatient ratios Coordination with other government programs
Slide 25: What We Know
What We Know 25 Areas of focus will include:QualityCustomer serviceInformation technology Compliance
Slide 26: MOH: Investment Highlights
26 Comprehensive Medicaid strategy with flexible service offering Focus on cost-effective quality healthcare Unique growth opportunity fueled by state budgets and health care reform Proven expansion/execution capabilities through acquisitions and start-ups Scalable administrative efficiencies stemmi
Slide 27: Panel Q&A
Panel 1 Q&A /980.20\0 MOLINA HEALTHCARE HEALTHCARE
Slide 28: Operations Update
28 Operations UpdateTerry BayerChief Operating Officer
Slide 29: Operations Update – Ohio
Operations Update – Ohio 29 Medical Care Ratio Managed Care Membership(in thousands)
Slide 30: Operations Update – California
Operations Update – California 30 Medical Care Ratio Managed Care Membership (in thousands)
Slide 31: Operations Update – Washington
Operations Update – Washington 31Medical Care RatioManaged Care Membership(in thousands)
Slide 32: Operations Update – Michigan
Operations Update – Michigan 32 Managed Care Membership(in thousands) Medical Care Ratio
Slide 33: Operations Update – Utah
Operations Update – Utah 33 Medical Care Ratio Managed Care Membership (in thousands)
Slide 34: Operations Update – Florida
Operations Update – Florida 34 Medical Care Ratio Managed Care Membership (in thousands)
Slide 35: Molina Medicaid Solutions Update
35 Molina Medicaid Solutions Update
Slide 36: Molina Launches Molina Medicaid Solutions
Molina Launches Molina Medicaid Solutions 36 Acquired Unisys Health Information Management (HIM) $131 million purchase price Transaction closed on May 1, 2010 Molina acquired: MMIS/Fiscal Agent contracts in ID, LA, ME, NJ, & WV Pharmacy Rebate Management contract in Florida Market leading QNXT-based
Slide 37: Molina Medicaid Solutions Model
Molina Medicaid Solutions Model We manage administrative costs; serve beneficiaries and providers; process claims; and provide reporting for planning and control. Design Sell Deliver Operate Our service model: Our opportunity: 37 Legacy systems are becoming obsolete CMS is requiring systems be 5010
Slide 38: Integration of COTS products
Integration of COTS products Products can be stand alone or used together as needed Products can be bolted on to existing legacy systems to enhance functionality Unified database Immediate access to all data Eliminate non-integrated data storage stovepipes Configurable components Quick adaptability
Slide 39: Operations Update – Molina Medicaid Solutions
Operations Update-Molina Medicaid Solutions (MMS) 39 Go Live 5/31/10 The transaction closed on May 1, 2010 Go Live 9/1/10 Idaho Maine Louisiana West Virginia Secured contract addendum to achieve 5010 compliance Secured 3 year extension through 3/2014 with 2 option years
Slide 40: MMIS Market Opportunity
MMIS Market Opportunity 40 MMIS has been around for more than 30 years and is one of the most expensive and complex system for states to maintain, enhance or replace. Outsourced toMMIS Vendors State Operated Other (i.e. Universities, vendor/state combinations) Source: CMS. MMIS Fiscal Agent Contract
Slide 41: The New 16 Million
41 The New 16 Million Jean Glossa, MD, MBA, FACPMedical Director
Slide 42: Who is the 2014 Medicaid Beneficiary?
42 Who is the 2014 Medicaid Beneficiary? Industry implications of PPACAWho are the 16M new patients and how do they compare with the current Molina members?Molina’s experience caring for this population Topics for this portion of the presentation
Slide 43: Industry Level Implications
Industry Level Implications 43 Eligibility & Exchange Coordination Rising Medicaid Expenditures Medicaid population has grown by 1.7% in the last 3 years, but it is expected to grow by 27% between 2014-2019. States are attempting to meet Medicaid budget reduction targets while at the same time spend
Slide 44: Who Are The 16M New Medicaid Enrollees?
Who Are The 16M New Medicaid Enrollees? 44 The new health care reform legislation increased Medicaid eligibility to 133% of the federal poverty level (FPL), or 16 million people. Source: “Financing New Medicaid Coverage Under Health Reform, ” Kaiser Family Foundation, May 2010 PPACA provides access
Slide 45: Medicaid eligibility is changing
Medicaid eligibility is changing 45 Source: Expanding Medicaid: Coverage for Low-Income Adults under Health Reform,” Kaiser Family Foundation, February 2010. Number of childless adults under 133% FPL: 11.8M Uninsured Number of parents under 133% FPL: 5.4M Uninsured Uninsured Adults at or below 133%
Slide 46: Medicaid Eligibility Is Changing to Cover More of the Working Poor
46 Medicaid Eligibility Is Changing to Cover More of the Working Poor 55% 80% While the age profile of the newly eligible is different, their employment profile is more similar to a Medicaid patient than to a commercial patient. The majority of working uninsured adults at or below 133% FPL work for
Slide 47: Health Status
Health Status 47 Many uninsured adults at or below 133% FPL face health problems that may worsen due to lack of coverage. *Among those with a chronic condition Source: Expanding Medicaid: Coverage for Low-Income Adults under Health Reform,” Kaiser Family Foundation, February 2010. Health status is l
Slide 48: Where Do the New Medicaid Eligibles Reside?
Where Do the New Medicaid Eligibles Reside? 48 Molina is strategically positioned to serve the newly eligible, as a majority of them reside in states in which Molina currently operates. Source: “Expanding Medicaid: Coverage for Low-Income Adults under Health Reform,” Kaiser Family Foundation, Februa
Slide 49: MOH: Strategically Positioned to Serve This New Population
49 California: legacy presence 17 company owned and operated primary care offices (est. 1980) Virginia: initial footprint expansion; 3 company operated County primary care health centers (May 2008) Washington: mental health and primary care integration (2010) Populations served: Uninsured Medicaid M
Slide 50: Direct Delivery Snapshot: Virginia
Direct Delivery Snapshot: Virginia 50 Beginning July 1, 2008, Molina began contracted management of operations in the Fairfax County Community Health Care Network (CHCN) in three county-owned health centers.
Slide 51: Direct Delivery Snapshot: Virginia
Direct Delivery Snapshot: Virginia Fairfax County residents only 200% Federal Poverty level No other insurance – no Medicaid, Medicare, or affordable insurance from work (9%) Many are unemployed, homeless Multicultural, multilingual 52,000 provider visits (2.9 visits per patient per year) 51 CHCN se
Slide 52: Primary Care Health Centers – Virginia
Primary Care Health Centers – Virginia County administrators perform on-site enrollment for Medicaid and other government programs Pharmacy with counseling services In-house specialty care Physical therapy on site In-house lab Mental health Diabetes nurse educator Social workers After hours access (
Slide 53: Top Diagnoses
Top 10 Diagnoses 53 Virginia Health Center diagnoses are more aligned with diagnoses among childless adults TANF Top 10 Diagnoses ABD Top 10 Diagnoses Virginia Health Centers Top 10 Diagnoses Well Child visits High blood pressure Diabetes Upper respiratory infection Physical exam High blood pressure
Slide 54: Primary Care + Mental Health
Primary Care + Mental Health 54 Individuals who are below 50% of the federal poverty level have a higher incidence of mental illness and substance abuse. Coordinated care management for people with Serious Mental Illness (SMI) Increased access to primary care through collocation with behavioral heal
Slide 55: Family Planning
Family Planning 55 Improve pregnancy planning, spacing, safer sexual behavior, and prevent unintended pregnancies. Family Planning (broad array of birth control options) Cervical cancer screening (pap and HPV) HPV vaccine STD testing and treatment Domestic violence screening and support group Mammog
Slide 56: Challenges for the New Population
56 Challenges for the New Population Challenges Solutions Language (Multilingual populations) TeleSalud 24/7 Nurse Advice Line Multilingual & multicultural staff 1:1 meetings with pharmacist Provider Scarcity Molina Direct Delivery (first-hand experience with this population) Fiscal Challenges Care
Slide 57: Medicaid Primary Care Payments to Increase Under PPACA
Medicaid Primary Care Payments to Increase Under PPACA 57 Medicaid-to-Medicare Fee Index for selected states*, 2008 Source: Kaiser State Health Facts (http://www.statehealthfacts.org/comparetable.jsp?ind=196&cat=4) *Medicaid as a percent of Medicare by service type With PPACA, Medicaid will reimburs
Slide 58: Direct Delivery: A Strong Strategic Fit
Direct Delivery: A Strong Strategic Fit 58 Capturing change in Medicaid payments Direct access to new Medicaid enrollees Relieve access problems for patients Improve access to Medicaid primary care Test new ideas and care management programs Unique among publicly traded companies Leveraging of the C
Slide 59: Panel Q&A
Panel 2 Q&A /980.20\0 MOLINA HEALTHCARE HEALTHCARE
Slide 60: Molina Medicaid Solutions Accounting Update
60 Molina Medicaid SolutionsAccounting Update Joseph White Chief Accounting Officer
Slide 61: Molina Medicaid Solutions
Molina Medicaid Solutions 61 Certain key accounting practices have a significant impact on revenue, cost and profitability trends Key Accounting Practices: Purchase Accounting Revenue Recognition Cost Recognition
Slide 62: Key Accounting Practices: Purchase Accounting
Key Accounting Practices: Purchase Accounting 62 Purchase Price $131M Contract Backlog18% Customer Relationships19% REDUCTION TO REVENUEFaster amortization: Spread only over base life of contract AMORTIZATION EXPENSESlower amortization: Spread over base life of contract & option years An unusual fea
Slide 63: Key Accounting Practices: Revenue Recognition
Key Accounting Practices: Revenue Recognition 63 State has the right to reject deliverables Revenue recognition occurs with state’s acceptance of a functioning MIS Guidance assumes acceptance (and revenue recognition) effective November 1, 2010. The point at which revenue recognition begins is uniqu
Slide 64: Key Accounting Practices: Revenue Recognition
Key Accounting Practices: Revenue Recognition 64 Net Revenue Estimate (Revenue including amortization of Customer Backlog) Q4- 11 QTRLY RUN RATE $45M-$50M Note: Amounts are estimates and subject to change. Actual results may differ materially. See cautionary statement. Please refer to the Company’s
Slide 65: Key Accounting Practices: Cost Recognition
Key Accounting Practices: Cost Recognition 65 Many costs are deferred until revenue recognition begins Once cost recognition begins deferred costs are recognized evenly over the initial contract term Recognition of deferred costs makes new contracts less profitable than older contractsDeferred costs
Slide 66: Key Accounting Practices: Cost Recognition
Key Accounting Practices: Cost Recognition 66 Estimated deferred costs for ME and ID that will be recognized through Dec. 31, 2011 ME and ID margins will be lower than margins of mature contracts Note: Amounts are estimates and subject to change. Actual results may differ materially. See cautionary
Slide 67: Profitability Trends: Estimated Margins
Profitability Trends: Estimated Margins 67 Profitability declines in Q3-10, falls further in Q4-10, stabilizes in Q1-11 and climbs thereafter.ME and ID margins will be lower than margins of mature contracts Note: Percentages are estimates and subject to change. Actual results may differ materially.
Slide 68: 2010 Financial Update
68 2010 Financial UpdateJohn MolinaChief Financial Officer
Slide 69: Cautionary Statement
Cautionary Statement 69 Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This slide presentation, as well as our accompanying oral remarks, contain numerous “forward-looking statements” regarding our operations for 2010 and subsequent fiscal years, the expected impac
Slide 70: Drivers of Revised Guidance
70 Drivers of Revised Guidance Equity IssuanceWisconsin AcquisitionTX CHIP RSA AwardMI Premium ReductionsOther Premium Rates ChangesImproved MMS Visibility
Slide 71: 2010 Guidance Issued: 5/5/10 vs 9/14/10
2010 Guidance Issued: 5/5/10 vs 9/14/10 71 5/5/10 9/14/10 Difference Premium Revenue Service Revenue Investment Income Medical Care Costs Medical Care Ratio Service Costs Service Revenue Ratio G&A Expense G&A Ratio Premium Tax Expense Depreciation & AmortizationInterest Expense Income Tax Net Income
Slide 72: Revised 2010 Guidance
Revised 2010 Guidance 72 6/30/10 YTD Est. Q3-Q4 2010(1) 2010 G(1) Premium Revenue Service RevenueInvestment IncomeMedical Care CostsMedical Care RatioService CostsService Revenue Ratio G&A ExpenseG&A RatioPremium Tax ExpenseDepreciation AmortizationInterest ExpenseIncome TaxNet Income Diluted EPS We
Slide 73: Key Assumptions for 2010 Guidance
Key Assumptions for 2010 Guidance* 73 MOH will keep current benefit of approximately $0.8M per month from Medicaid Rx rebates through December 31, 2010 No change to MI premium rates effective October 1, 2010 2% premium rate increase in California effective October 1, 2010 Normal flu patterns through
Slide 74: Premium Rates
Premium Rates 2010 Guidance (Issued 9/14/10) 74 Health Plan 2010 Effective Date Rate Change California 10/1 2.0% (1) Florida 9/1 1.4% (1) Michigan 10/1 0.0% (1) Missouri 7/1 (1.0%) New Mexico 7/1 (1.0%) Ohio 1/1 6.0%(2) Texas 9/1 (1.0%) Utah (Medicaid only) 7/1 8.0% Washington 7/1 2.5% (1) Estimated
Slide 75: Panel Q&A
Panel 3 Q&A /980.20\0 MOLINA HEALTHCARE HEALTHCARE
Slide 76: Appendix
Appendix 2° . BRR MOLINA | secrnenisn HEALTHCARE
Slide 77: Managed Care Contracts
Managed Care Contracts 77 One year extension in process.Two year extension in process. Renewal Date Contract Description Upcoming RFP California 3/31/12 12/31/12 3/31/11 9/30/10 LA County Two-Plan Model Medi-Cal Sacramento GMC Program Inland Empire Two-Plan Model Medi-Cal San Diego GMC Program1; Hea
Slide 78: Membership 2010
Membership 2010 78 Note: *Amounts are estimates and subject to change. Actual results may differ materially. See cautionary statement. Membership as of 12/31/09 Membership as of 6/30/10 Estimated Membership 12/31/10* California 349,000 345,000 342,000 Florida 50,000 54,000 59,000 Michigan 220,000 22