Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (September 2011)
58 slides from Molina Healthcare's investor day presentation, Sep 16, 2011
Slide 1: Investor Day 2011
New York, New York September 15, 2011 INVESTOR DAY 2011B
Slide 2: Agenda
Agenda 12:30pm-12:35pm 12:35pm-1:10pm 1:10pm-1:30pm 1:30pm-1:40pm 1:40pm-2:15pm 2:15pm-2:40pm 2:40pm-3:00pm 3:00pm-3:15pm 3:15pm-3:50pm 3:50pm-4:30pm 4:30pm Opening Remarks Business Overview Q&A Break Health Plan Update Financial Update Q&A Break The Dual Eligible Opportunity Q&A End of Program Juan
Slide 3: Cautionary statement: Safe Harbor
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 business operations, membership levels, RFPs, benefit changes, rate
Slide 4: Business Overview
New York, New York September 15, 2011 Business Overview J. Mario Molina, MD President & Chief Executive Officer
Slide 5: Business snapshot
Business snapshot Markets and members served - 2Q 2011 Washington 345,000 California 348,000 New Mexico 89,000 Utah 82,000 Texas 129,000 Missouri 80,000 Michigan 220,000 Ohio 245,000 Florida2 66,000 Health plan enrollment Health plan membership profile (in thousands) Molina Healthcare Health Plans M
Slide 6: Quality and value
Quality and value QD. 2. 2. QQ. QD. OL aster tte Mota eateare “innings “aetna one “ean ‘tone ‘one
Slide 7: Health care reform update
Health care reform update Medicaid Provisions (all in effect) include: Center for Medicare and Medicaid Innovation Medicaid Health Homes Chronic Disease Prevention Medicaid Payments for Hospital-Acquired Infections Medicaid Long-Term Care Services 18 of 21 of the 2011 provisions of the Affordable Ca
Slide 8: Health care reform update
Health care reform update CMS issued draft regulations on the creation of state-based health insurance exchanges, giving states broad flexibility to create their insurance marketplace by 2014. Only three Molina MCO states have enacted legislation regarding health insurance exchanges as of today. Wes
Slide 9: U.S. Medicaid Spending and Enrollment
U.S. Medicaid Spending and Enrollment Percent Changes, FY 1998 - FY 2011 (CHART) Source: Kaiser Commission on Medicaid and the Uninsured, September 2010. http://www.kff.org/medicaid/8105.cfm // Note: Enrollment percentage changes from June to June of each year. Spending growth percentages in state f
Slide 10: State share of Medicaid spending is growing
Annual Percentage Changes 2007 - 2020 (Projected) 2007 - 2020 (Projected) 2007 - 2020 (Projected) 10 Source: Percentages compiled by Health Management Associates (HMA) based on data from CMS Office of Actuary, August 2011. End of Enhanced FMAP State share of Medicaid spending is growing Average Annu
Slide 11: State budgets have yet to recover
Medicaid monthly enrollment increased by nearly six million (13.6%) from December 2007 to December 2009. Medicaid spending, both in medical services and overall, has risen faster than growth in national health expenditures and the gross domestic product (GDP), both in the last two years as well as t
Slide 12: Federal fiscal pressure on Medicaid is intensifying
Federal fiscal pressure on Medicaid is intensifying States are concerned the drive to balance federal budget could shift costs to states New 12-Member Bi-Partisan Committee will look at several options Other considerations: Block grants Blended/lower federal Medicaid matching rates Limits on state t
Slide 13: Why managed care is a viable solution
Why managed care is a viable solution Although some states project improved cash flows over the next few years as the economy recovers, states' fiscal conditions remain very weak. (CHART) -$110 -$191 -$160 -$140 State Budget Shortfalls After Use of Recovery Act Funds Budget shortfalls in billions So
Slide 14: Q&A
Q&A 14
Slide 15: Health Plan Update
New York, New York September 15, 2011 Health Plan Update Terry P. Bayer Chief Operating Officer
Slide 16: California
California 16 Good performance continues Consolidated and redirected services to lower cost, more efficient providers Continued growth in Special Persons with Disabilities (California term for ABDs) Enrollment in mandatory managed care began in June 2011 State budget - provider rate cut pending (CHA
Slide 17: Washington
Washington 17 Stable performance continues Re-procurement pending (CHART) (CHART) Molina Healthcare of Washington Historical and YTD Enrollment 2007-2Q2011 Molina Healthcare of Washington Historical and MCR 2007-2Q2011
Slide 18: Ohio
Ohio 18 Excellent performance continues Pharmacy carve-in October 1, 2011 Re-procurement pending (CHART) (CHART) Molina Healthcare of Ohio Historical and YTD Enrollment 2007-2Q2011 Molina Healthcare of Ohio Historical and MCR 2007-2Q2011
Slide 19: Michigan
Michigan 19 Medical cost control continues "Excellent" NCQA accreditation 6,500 Medicare SNP members as foundation for future dual eligible expansion (CHART) (CHART) Molina Healthcare of Michigan Historical and YTD Enrollment 2007-2Q2011 Molina Healthcare of Michigan Historical and MCR 2007-2Q2011
Slide 20: Florida
Florida Medical cost reduction plan in place Reductions in lab and behavioral health effective 7/1/11 Pharmacy PMPM reduction Biggest challenges: Rates Contract renegotiation 20 (CHART) (CHART) Molina Healthcare of Florida Historical and YTD Enrollment 2009-2Q2011 Molina Healthcare of Florida Histor
Slide 21: Texas
Texas 21 Medical cost reduction plan in place Contract renegotiation Jefferson Service Area expansion 9/1/11 Expansion award effective 3/1/12 (CHART) (CHART) Molina Healthcare of Texas Historical and YTD Enrollment 2007-2Q2011 Molina Healthcare of Texas Historical and MCR 2007-2Q2011
Slide 22: Texas today
Texas today Through our current STAR, STAR+PLUS and CHIP RSA contracts, we already have a strong network on which to build in order to accommodate the expansion. Molina STAR, STAR+PLUS, and CHIP RSA Footprint (as of 9/1/2011) Molina CHIP RSA Footprint Molina STAR, STAR+PLUS Footprint 22
Slide 23: Texas win overview
Texas win overview Molina CHIP RSA Footprint 23 Bexar Service Area STAR+PLUS Dallas Service Area STAR (new) STAR+PLUS CHIP (new) El Paso Service Area STAR+PLUS (new) STAR (new) Harris Service Area STAR+PLUS STAR CHIP Hidalgo Service Area STAR+PLUS (new) STAR (new) CHIP RSA Jefferson Service Area STA
Slide 24: Texas win overview
Texas win overview 24 MOH IR DayJan 2011 Revised Sept 2011 Total Covered Population 3.4M 3.4M Population Up for Bid 3.2M 3.2M Effective Date 3/12 3/12 MOH Expected Membership Prior to Expansion1 125K 150K MOH Expected Additional Membership2 220K 220K Total Expected MOH Membership2 345K 370K MOH Expe
Slide 25: RFP update
RFP update 25 FL* GA IL OH* WA* Total Covered Population 3.2M 1.8M 2.6M 1.8M .8M Population Up for Bid 1.6M 1.5M 1.8M 1.8M .8M Effective Date >2012 7/2013 >2012 7/2012 7/2012 RFP Process TBD Delayed TBD ^Sept. ^Sept. Potential New Populations TBD TBD TBD ABD Kids ABD Please refer to the Company's ca
Slide 26: Managed care carve-ins
Managed care carve-ins 26 In October 2011, Ohio pharmacy benefits are expected to be carved in. Texas pharmacy and inpatient benefits are expected to be carved in starting in March 2012. Upon carve-in, members will receive their benefits through their providers rather than through the state's fee-fo
Slide 27: Financial Update
New York, New York September 15, 2011 Financial Update John C. Molina Chief Financial Officer
Slide 28: Rate update
Rate update 28 Health Plan Date Revenue Impact1 California (10% provider rate cut) 7/1/2011 (^6.0%) Florida 9/1/2011 unknown Michigan 10/1/2011 unknown Missouri 7/1/2011 ^5.0% New Mexico 7/1/2011 (^2.5%) Ohio 1/1/2012 unknown Texas 9/1/2011 (^2.0%) Utah 7/1/2011 (^2.0%) Washington 10/1/2011 unknown
Slide 29: Financial results
29 2Q 2010 Premium Revenue Service Revenue Investment Income Medical Care Costs Medical Care Ratio Service Costs G&A Expense G&A Ratio Premium Tax Expense Depreciation and Amortization Interest Expense Income Before Tax Income Tax Net Income Diluted EPS Weighted Average Diluted Shares Outstanding EB
Slide 30: 2011 guidance
2011 guidance 30 Strong performance of established health plans & fiscal agents Earlier than anticipated utilization improvements Improvement in fiscal agent business expected in second half of 2011 Premium rate reductions Cost challenges in Texas and Florida health plans $1.55 Guidance Issued Jul 2
Slide 31: New credit facility discussion
New credit facility discussion Size: $170 Million Right sized for Molina's needs, balancing: Need for readily available cash Commitment fees Size of bank group Terms: Five year maturity Market rates Simpler covenants Smaller, manageable bank group: Focus on long-term relationships Cash management an
Slide 32: Strategic fit of fiscal agent & health plan business
Strategic fit of fiscal agent & health plan business Focused on Government Patient Base Health Care Information Technology Firm in Fiscal Agent Market Leverage Health Plans' Care Management Offerings for Fiscal Agent Business Leverage Health Plans' Cost Containment Methodologies for Clients 32 Molin
Slide 33: Experience matters
Experience matters Experience matters 33 MMS EBITDA (six months as of June 30, 2011) (six months as of June 30, 2011) (six months as of June 30, 2011) Health Plans EBITDA (six months as of June 30, 2011) $8M* *Total EBITDA Legacy Fiscal Agent contracts include: Louisiana, New Jersey, West Virginia,
Slide 34: Experience matters: total Molina EBITDA
Experience matters Experience matters 34 TOTAL MOLINA EBITDA (six months as of June 30, 2011) $97M* $132M ($35M) Total EBITDA (Legacy + New) MOH Legacy MOH New Please refer to the Company's cautionary statement. *Total EBITDA MOH Legacy includes: Health Plans in California, Michigan, Missouri, New M
Slide 35: Molina Medicaid Solutions status update
Molina Medicaid Solutions Idaho Status Update "Out-of-pilot" releases DDI payments Agreement reached on operational revenue Maine Status Update CMS September certification visit Key stabilization metrics have been achieved (call center, enrollment and prior authorizations) 35 Please refer to the Com
Slide 36: Molina Medicaid Solutions upsells
Molina Medicaid Solutions upsells Molina Medicaid Solutions upsells 36 Item Narrative When Sold (Qtr/Yr) InterQual Application of InterQual criteria to state operated facilities 1Q 2011 5010/ ICD-10 10th Revision of the International Code of Diagnoses Compliance Project 1Q 2011/3Q 2011 West Virginia
Slide 37: Q&A
Q&A 37
Slide 38: The Dual Eligible Opportunity
New York, New York September 15, 2011 The Dual Eligible Opportunity J. Mario Molina, MD President & Chief Executive Officer
Slide 39: Unprecedented new focus on dual eligibles
Unprecedented new focus on dual eligibles Recognition that duals are the most costly group of beneficiaries for both Medicaid and Medicare Duals account for approximately 15% of Medicaid enrollees but contribute to 39% of all Medicaid spending2 Medicaid/Medicare spending averages $20K per dual per y
Slide 40: Unprecedented new focus on dual eligibles
CMS awarded 15 states to receive up to $1 million to support the design of programs to integrate care and to design shared savings initiatives. Unprecedented new focus on dual eligibles 40 Source: CMS, http://www.cms.gov/medicare-medicaid- coordination/05_StateDesignContractSummaries.asp. Molina Sta
Slide 41: Dual eligibles enrollment and Medicaid spending
Dual eligibles enrollment and Medicaid spending 8.7 million duals drive nearly half of Medicaid and one quarter of Medicare spending, roughly $300 billion combined. 1.6 million duals with annual Medicaid costs of more than $25,000 account for more than 70% of all dual spending. 41 (CHART) Dual Eligi
Slide 42: Dual eligible spending
Dual eligible spending 42 42 Sources: Urban Institute analysis of data from MSIS and CMS Form 64, prepared for the Kaiser Commission on Medicaid and the Uninsured, Medicare Chartbook, 2010. Kaiser State Health Facts Medicare Payment Advisory Commission (http://www.medpac.gov/documents/Jun11DataBookE
Slide 43: Dual eligibles
Dual eligibles 87% of duals have more than one chronic condition 70% of Medicaid spending on duals is for Long-Term Care (LTC) Molina's experience with LTC WMIP program since 2005 STAR+PLUS since 2008 Molina's SNP experience Molina's SNP dual eligible plan is ranked number 8 nationwide 43
Slide 44: Long-Term Care and Medicaid
Long-Term Care and Medicaid Long-Term Care includes: Mental disabilities Spinal cord or traumatic brain injuries Severe chronic illnesses Nursing home care Home health care Assisted living facility Adult day care Alternate care Respite care 44 Medicare covers skilled nursing facilities up to 100 day
Slide 45: Dual eligibles demographics
Dual eligibles demographics 45 Source: Kaiser Commission on Medicaid and the Uninsured report, "Chronic Disease and Co^Morbidity Among Dual Eligibles: Implications for Patterns of Medicaid and Medicare Service Use and Spending" July 2010. (CHART) Female 63% Male 37% Over Age 65 63% Under Age 65 37%
Slide 46: Dual eligibles in Molina states
Dual eligibles in Molina states 46 46 Source: CMS Fact Sheet, "People Enrolled in Medicare and Medicaid," May 2011. Approximately 40% of all duals in the United States reside in Molina states. Established programs position Molina to serve duals
Slide 47: Molina overview of duals
Molina overview of duals Molina overview of duals 47 All duals are ABDs, but not all ABDs are duals.
Slide 48: Duals programs
Duals programs Fragmented programs Even under managed care the programs are fragmented Goal is to streamline and simplify programs Recommend managed care for duals Examples of proposals include: Bowles-Simpson proposal Domenici proposal The Heritage Foundation proposal Wyden-Brown proposal 48
Slide 49: Fragmentation in current SNP model
Fragmentation in current SNP model 49 Medicare (Federal) Medicare Special Needs Plans HMOs Other SNP HMOs Prescription Drugs Physician Hospital SNFs & Long Term Care Medicaid (State) Medicare Special Needs Plans HMOs Other SNP HMOs Medicare (Federal) Medicaid (State) Prescription Drugs Physician Hos
Slide 50: Long-Term Care costs
Long-Term Care costs 50 Sources: 1. Skilled Nursing Facility Organization (http://www.skillednursingfacilities.org/blog/skilled-nursing-facilities-cost/). 2. Long Term Care Feds (http://www.ltcfeds.com/start/aboutltc_cost.html) Average Annual Costs of Skilled Nursing Facilities vs. Home Care (CHART)
Slide 51: Dual eligible care coordination
Dual eligible care coordination Coordinating Medical Care Allows states to choose the locus and level of integration that meets their needs and goals Capitated models provide states greater budget predictability (although consideration needs to be given to the degree of financial risk) Allows for so
Slide 52: Molina's membership ranking
Molina's membership ranking 52 *Information sourced quarterly Source: CMS Health Plan Management System as of 8/2011 (updated 9/5/11). Top 10 SNP Dual Eligible Plans Nationwide* Top 10 SNP Dual Eligible Plans Nationwide* Top 10 SNP Dual Eligible Plans Nationwide* Rank Plan Membership 1 United1 178k
Slide 53: Case Study: Michigan
Case Study: Michigan Case Study: Michigan 53 Source: CMS State Demonstrations for Integrate Care for Dual Eligible Individuals, MI Summary Kaiser State Health Facts, "Total dual Eligible Enrollment in Managed Care as of June 30, 2009" (http://www.cms.gov/medicare-medicaid- coordination/downloads/CMS
Slide 54: Opportunities in perspective
Opportunities in perspective 54 (CHART) $4.0B Kentucky Medicaid RFP 800K eligibles $2.2B Louisiana Medicaid RFP 844K eligibles $7.8B Michigan Dual Eligible Care Coordination 234K eligibles $3.6B Medicaid $4.2B Medicare The Advocate, "Contract Winners want to protect data." August 2, 2011 Insider Lou
Slide 55: Investment highlights
Investment highlights Attractive sector growth prospects driven by government policies and economic conditions Proven flexible health care services portfolio (risk- based, fee-based and direct delivery) Diversified geographic exposure with significant presence in high growth regions Focus on governm
Slide 56: Q&A
Q&A 56
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Slide 58: Reconciliation of Non-GAAP to GAAP Financial Measures
Reconciliation of Non-GAAP to GAAP Financial Measures (1) GAAP stands for U.S. generally accepted accounting principles. (2) We calculate EBITDA consistently on a quarterly and annual basis by adding back depreciation and amortization to operating income. Operating income includes investment income.