Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (January 2010)
89 slides from Molina Healthcare's investor day presentation, Jan 27, 2010
Slide 1: Investor Day 2010
1 Investor Day 2010A January 27, 2010 New York, NY
Slide 2: Cautionary statement
2 Title: Cautionary statement 2 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” related to future events, plans, projections, or conditions, including, w
Slide 3: Investor Day 2010 - J. Mario Molina, CEO
Investor Day 2010A J. Mario Molina, MD President & Chief Executive Officer January 27, 2010 New York, NY
Slide 4: Molina Healthcare
4 molina healthcare
Slide 5: Growth Strategy
(Gp:) Title: Growth Strategy 5 1. Leverage our core business Expand the business: Increased market penetration in existing markets Strategic acquisitions Entry into new markets or programs (risk & fee based) 3. Strive for operational excellence: Quality & accreditation Customer service Administrativ
Slide 6: Leveraging technology to sustain growth
Title: Leveraging technology to sustain growth Other Placeholder: Molina Healthcare IT Center: state-of-the-art data processing Cisco HealthPresence™ HIM: pending acquisition of technology focused company 6
Slide 7: Building a flexible health care services portfolio
7 Title: Building a flexible health care services portfolio Molina Healthcare to acquire Unisys Health Information Management (HIM) $135MM purchase price Transaction expected to close in Q1/Q2 2010 Accretive to operating cash flow but dilutive to EPS in 2010 Molina acquires: State Fiscal Agent contr
Slide 8: Strategic alignment
8 Title: Strategic alignment 1. Medicaid Managed Care Design Development & Implementation, IT outsourcing, Assumption and Administration of Systems/Operations, Fiscal Agent Services, Care and Utilization Management Risk Based Contracting Scope (Medicaid + Medicare) Medicaid program health plan outso
Slide 9: Building a flexible health care services portfolio
9The combined services portfolio will include Molina’s managed care offering combined with the systems and fiscal agent services of HIM’s product suite. Building a flexible health care services portfolio (Gp:) (Gp:) Value Proposition for States: Comprehensive medical management, cost containment, pr
Slide 10: Snapshot of combined operation (Molina + HIM)
10 Title: Snapshot of combined operation (Molina + HIM) Beneficiaries Providers Employees Medicaid Contracts
Slide 11: Unisys HIM: a strong strategic fit
Title: Unisys HIM: a strong strategic fit Molina footprint HIM footprint Diversifies the product portfolio for marketing Medicaid solutions to state governments (risk + fee for service) Enhanced competitive position and brand profile in U.S. Medicaid sector Increases geographic and revenue diversifi
Slide 12: Molina Healthcare Investor's Day 2010 - Anthony Rodgers, HMA
Title: Molina Healthcare Investor’s Day 2010 SubTitle: Anthony D Rodgers, Principal Health Management Associates
Slide 13: Presentation Topics
Title: Presentation Topics Other Placeholder: Medicaid MMIS Customers and Vendor Expectations High Level View of the MMIS Infrastructure The Medicaid Information Management Systems Market The Impact of Environmental Changes on the MMIS Market 13
Slide 14: Persons with Medicaid Coverage: Upward Growth for Two Decades
Title: Persons with Medicaid Coverage: Upward Growth for Two Decades SOURCE: 1966 – 2008: HMA analysis of CMS and CBO historical data 2009-2019 and CBO Medicaid projections, 2009. Millions of U.S. Medicaid Beneficiaries during year. 1999: 43 Million 1989: 23 Million 1979: 21 Million 2009: 68 Million
Slide 15: CMS Requirements for Fiscal Agents and State Operated MMIS Environments
Title: CMS Requirements for Fiscal Agents and State Operated MMIS Environments Other Placeholder: Business-driven enterprise architecture System environment must operated based on industry standards Efficient and effective data sharing capability Supports interoperability, system integration, and op
Slide 16: State and Federal Customer Expectations for MMIS Vendors
Title: State and Federal Customer Expectations for MMIS Vendors and Fiscal Agents Other Placeholder: Align information requirements with Medicaid enterprise vision and direction Lower overall life-cycle maintenance and development costs Lower claims processing and administrative operations costs Ena
Slide 17: Medicaid Information Management System Environment
Title:Medicaid Information Management System Environment January 25, 2010 17
Slide 18: Medicaid Information Technology Architecture
Title: Medicaid Information Technology Architecture 18
Slide 19: Medicaid Information Technology Framework
Title: Medicaid Information Technology Framework (Gp:) Data Processing (Gp:) Data Management Layer (Gp:) Data Standards (Gp:) Data Flow (Gp:) Business Services (Gp:) Technical Services (Gp:) Technology Solutions (Gp:) Technical Functionality (Gp:) Application Architecture (Gp:) Technology Standards
Slide 20: IT Life Cycle for New MMIS Business
Title: IT Life Cycle for New MMIS Business January 25, 2010 20
Slide 21: Industry Fees and Charges
Title: Industry Fees and Charges21
Slide 22: MMIS Life Cycle Expenditure
Title: MMIS Life Cycle Expenditure January 25, 2010 22
Slide 23: Scope of MMIS and Fiscal Agent Contracts with States
Title:Scope of MMIS and Fiscal Agent Contracts with States 23
Slide 24: The MMIS Market
The MMIS Market HEALTH MANAGEMENT ASSOCIATES 24
Slide 25: State MMIS Contracts Expiration Dates By Fiscal Year
Title: State MMIS Contracts Expiration Dates By Fiscal Year Source: CMS MMIS fiscal agent contract status report Note: State contract expiration dates include optional extensions years 25
Slide 26: MMIS Contractor Market Share
Title: MMIS Contractor Market Share 26
Slide 27: Competitors
Title: Competitors Based on CMS reported expenditures for Vendor and State Operated MMIS 27
Slide 28: Market Share
Market Share State MMIS Market Share Based on Revenues Unisys Others 6% 3% State Operated 19% HEALTH AGEMENT ASSOCIATES
Slide 29: Significant Changes in the MMIS Market Driven by New Requirements and HIT
Title: Significant Changes in the MMIS Market Driven by New Requirements and HIT 29
Slide 30: MMIS Conversion to ICD
Title: MMIS Conversion to ICD 10 Other Placeholder: Medicaid Programs are required to convert to HIPAA v5010/D.0 electronic transaction standards (Jan. 2012) and ICD-10-CM and ICD-10-PCS claims code sets (Oct. 2013) This will have a significant impact on the MMIS market “front end systems”, core cla
Slide 31: Health Information Exchange Platform Architecture
Title: Health Information Exchange Platform Architecture Radiology Medicaid Health Data Publication Layer Clinical Lab Data Sources Health Data Management Layer Medicaid Health Data Integration and Translation Layer Data Analysis Applications Web Services Application Collaborative Knowledge Manageme
Slide 32: Medicaid HIT Infrastructure Platform Design
Medicaid HIT Infrastructure Platform Design 32
Slide 33: Questions
Questions HEALTH MANAGEMENT ASSOCIATES 33
Slide 34: Cost Drivers of 2009 - John Molina, CFO
Cost Drivers of 2009 John Molina Chief Financial Officer January 27, 2010 New York, NY
Slide 35: 2009-2010 Flu Season in Molina Markets
Title: 2009-2010 Flu Season in Molina Markets 35 Source: Google Flu Trends (http://www.google.org/flutrends) ‘09Q3 ‘09Q4 United States & Molina Top Membership Markets Number of Patients with Flu-Like Symptoms ‘10Q1 ‘10Q2 over 75% of Molina’s membership resides in these states Flu activity has result
Slide 36: Length of Enrollment (LOE)
Title: Length of Enrollment (LOE) 36 As length of enrollment increases, the paid PMPM decreases. Costs tend to be higher in the early months of a member’s enrollment history. 2 Note: E denotes estimate. The Company is currently in the process of finalizing its results for the fourth quarter and full
Slide 37: Trend in ER Facility and cost utilization
Title: Trend in ER Facility and cost utilization 37 Coding to higher levels contributing to higher costs per visit. Cost per visit up 9%, utilization trend up 9%, total trend up 18%.
Slide 38: Rising outpatient costs
38 2 2009 Outpatient Prospective Payment System (OPPS); CMS American College of Emergency Physicians 2007 1 Rising outpatient costs
Slide 39: Addressing 2009 cost drivers in 2010
Title: Addressing 2009 cost drivers in 2010 39 (Gp:) 1 (Gp:) 2 (Gp:) 3 (Gp:) 4 (Gp:) 5 (Gp:) 6 Utilization Management Case & Care Management Network & Contract Management Claims Payout Management Underwriting & Pricing Product & Benefit Design Unavailable in Medicaid managed care Medical Management
Slide 40: Network & Contract Management/Claims Payout Management
Network & Contract Management/Claims Payout Management Terry Bayer Chief Operating Officer January 27, 2010 New York, NY
Slide 41: Addressing 2009 cost drivers in 2010
Title: Addressing 2009 cost drivers in 2010 41 (Gp:) 1 (Gp:) 2 (Gp:) 3 (Gp:) 4 (Gp:) 5 (Gp:) 6 Utilization Management Case & Care Management Network & Contract Management Claims Payout Management Underwriting & Pricing Product & Benefit Design Unavailable in Medicaid managed care Medical Management
Slide 42: Refining the provider network
42 Title: Refining the provider networkIn competing for state contracts we have built large provider networks As a result 38% of our primary care doctors have fewer than 25 members.
Slide 43: Medical Cost Ratio by Total Number of Members
Title: Medical Cost Ratio by Total Number of Members1 43 Providers with more members are more efficient. MCR Composite including Michigan, Ohio, Washington, and New Mexico MCR by Total # of Members Linear (MCR by Total # of Members) MCR
Slide 44: Refining the provider network
Title: Refining the provider network 44 Percent of our providers with less than 25 members. Percent of our overall membership that resides with providers with fewer than 25 members. Medical Care Ratio associated with providers with fewer than 25 members. We can reduce the size of the provider panel
Slide 45: Benefits of refining the provider network
Title: Benefits of refining the provider network Other Placeholder: Meaningful volume gets providers’ attention Increased commitment to Medicaid Focused support for Molina programs Improved HEDIS scores Member education Improved compliance Increases loyalty among providers and the health plan Referr
Slide 46: HealthPresence expands Molina's reach
Title: HealthPresenceTM expands Molina’s reach 46 We are leveraging technology to enhance provider access for underserved populations Benefits: Allows us to apply telemedicine to actually examine patients Provides better care coordination and patient management Highly effective in rural areas or whe
Slide 47: Efficiently managing medical claims
Title: Efficiently managing medical claims 89% 96% 99% Claims Processed Within 30 Days Electronic Claims Receipt (EDI) 61% 69% 73% 43% 46% 59% Auto Adjudication Rate 99% 79% 63% Despite a 20% increase in claims volume, claims inventories remain flat. 47 Note: E denotes estimate. The Company is curre
Slide 48: Addressing 2009 cost drivers in 2010
Title: Addressing 2009 cost drivers in 2010 48 (Gp:) 1 (Gp:) 2 (Gp:) 3 (Gp:) 4 (Gp:) 5 (Gp:) 6 Utilization Management Case & Care Management Network & Contract Management Claims Payout Management Underwriting & Pricing Product & Benefit Design Unavailable in Medicaid managed care Medical Management
Slide 49: Medical Management - Jim Howatt, MD
Medical Management Jim Howatt, MD Chief Medical Officer January 27, 2010 New York, NY
Slide 50: Addressing 2009 cost drivers in 2010
Title: Addressing 2009 cost drivers in 2010 50 (Gp:) 1 (Gp:) 2 (Gp:) 3 (Gp:) 4 (Gp:) 5 (Gp:) 6 Utilization Management Case & Care Management Network & Contract Management Claims Payout Management Underwriting & Pricing Product & Benefit Design Unavailable in Medicaid managed care Medical Management
Slide 51: Reducing hospital readmissions
51 30 day Readmit Data by Program Reducing avoidable readmissions should lead to lower hospital costs. Addressing the problem: Discharge planning Telephone contact after discharge Outpatient support of the discharge plan Monitoring claims for readmissions Reducing hospital readmissions
Slide 52: Reducing emergency room utilization
Title:Reducing emergency room utilization Other Placeholder:The Problem:Unacceptably high number of ER visits are “repeats” Most repeat visits are for non-emergent conditions Most repeat visits occur within days of the initial visit so timely intervention is key52“In Ohio, 39% of our members who wer
Slide 53: Reducing emergency room utilization: Management Actions
Other Placeholder: Management Actions: Launching a pilot in Ohio to take advantage of stepped-up provider cooperation plus new technology 5 participating facilities are now providing notification of member ER visits within 3 to 5 days of service “Eliza” interactive voice technology system will be us
Slide 54: 17-P Program
Title: 17-P Program 54 2008 2009 419 154 2010E 600 The 17-P program identifies pregnancies with a history of premature delivery, and includes a weekly administration of a hormone shot. Results in approximately 1/3 reduction in repeat premature births. Total Participating Pregnancies
Slide 55: MHI Premature/NICU Days - All Plans
Title: MHI Premature/NICU Days – All Plans Number of NICU days per 1000 Live Births # Days 55
Slide 56: 4Q08 vs 4Q09 pharmacy experience
Title: 4Q08 vs 4Q09 pharmacy experience Cost per Rx 8% 2% Rx per 1,000 Utilization Unit Cost 10,134 9,365 $38.48 $37.68 Note: Both years exclude Missouri, where Rx benefit was carved out, 10/1/09. 56
Slide 57: Person-centered healthcare home
Title: Person-centered healthcare home 57 Breaking the wall between primary and behavioral health care services Coordinated care management for people with Severe Mental Illness (SMI) Increased access to primary care through collocation with behavioral health provider Integration of physical health,
Slide 58: Q&A
Q&A ae HEALTHCARE
Slide 59: HIM Accounting Discussion - Joseph White
HIM Accounting Discussion Joseph White Chief Accounting Officer January 27, 2010 New York, NY
Slide 60: Two Different Financial Models
60 Body: Advantages Predictable expense Opportunity for administrative efficiencies Low capital requirements (system development cost paid by the states) Small downside Easy upstream of cash Body: Advantages Predictable revenue Opportunity for medical management efficiencies Revenue paid in advance
Slide 61: Two Different Accounting Profiles
Body: Income Statement Design, Development & Implementation (DDI) revenue recognized long after cash is received DDI expense recognized long after cash is paid Body: Income Statement Revenue recognition and cash receipt nearly simultaneous Expense recognition and cash disbursement nearly simultaneou
Slide 62: Why the Different Accounting Profiles?
62 Revenue: HMO revenue is based upon the eligibility of the member for services MMIS revenue is earned when the services are performed Business Process Outsourcing (BPO)– payment of claims, flat fees, PMPM fees DDI - milestone and certification payments for systems readiness Expense: HMO expense is
Slide 63: What Makes MMIS Revenue Complicated?
63 What Makes MMIS Revenue Complicated? *Note: BPO revenue earned between “go live” and system certification may be deferred
Slide 64: Revenue and Expense Recognition
64 Revenue and Expense Recognition CASH IN REVENUE CASH IN (DDI) UNEARNED REVENUE EXPENSE CAPITALIZED COST CASH OUT EXPENSE CASH OUT (DDI) HMO MMIS - DDI BALANCE SHEET INCOME STATEMENT MMIS HMO
Slide 65: Revenue and Expense Recognition
65 Revenue and Expense Recognition CASH IN REVENUE BPO REVENUE CASH IN (BPO) EXPENSE CASH OUT BPO EXPENSE CASH OUT (BPO) HMO MMIS – “GO LIVE” BALANCE SHEET INCOME STATEMENT MMIS HMO
Slide 66: Revenue and Expense Recognition
66 Revenue and Expense Recognition REVENUE MMIS – CERTIFICATION BALANCE SHEET INCOME STATEMENT BPO REVENUE CASH IN (BPO) BPO EXPENSE MMIS – “GO LIVE” CASH IN (DDI) UNEARNED REVENUE CASH OUT (BPO) MMIS CASH IN (BPO) CAPITALIZED COST EXPENSE CASH OUT (DDI) CASH OUT (BPO)
Slide 67: What Are the Keys to Profitability?
MMIS (Fee Based) HMO (Risk Based) Manage DDI process Enhance productivity Manage change orders Introduction of new products and services Manage medical costs Control administrative costs Grow enrollment High revenue Low margin High variability Low revenue High margin Low variability What Are the Key
Slide 68: Financial Discussion - John Molina, CFO
Financial Discussion John Molina Chief Financial Officer January 27, 2010 New York, NY
Slide 69: Fourth Quarter 2009 Preliminary Financial Results
69 Higher utilization due to widespread flu across Molina markets Higher emergency room costs Margin compression related to state budget shortfalls Rate decreases in New Mexico and Washington Missouri pharmacy carve-out Enrollment growth and the higher costs associated with new members Higher genera
Slide 70: 2009-2010 Flu Season in Molina Markets
Title: 2009-2010 Flu Season in Molina Markets 70 Source: Google Flu Trends (http://www.google.org/flutrends) ‘09Q3 ‘09Q4 United States & Molina Top Membership Markets Number of Patients with Flu-Like Symptoms ‘10Q1 ‘10Q2 over 75% of Molina’s membership resides in these states Flu activity has result
Slide 71: Flu Cost per Member per Month
Title: Flu Cost per Member per Month 2008-2009 71 Q408 Average $10.35 Q409 Average $13.37 Flu activity has resulted in higher utilization Note: E denotes estimate. The Company is currently in the process of finalizing its results for the fourth quarter and full year 2009. There can be no assurance t
Slide 72: Flu Impact - EPS
Title: Flu Impact – EPS Incremental over 2008 72 2Q09 ($0.02) ($0.59) 1Q09 4Q09E 3Q09 FY2009E ($0.14) ($0.13) ($0.32) 1. Quarterly EPS does not sum to YTD EPS due to differing number of shares. 1 EPS 0 Note: E denotes estimate. The Company is currently in the process of finalizing its results for th
Slide 73: ER Costs
Title: ER Costs 73Coding to higher levels contributing to higher costs per visit. Cost per visit up 9%, utilization trend up 9%, total trend up 18%. Please refer to The Company’s cautionary statement on page 2.
Slide 74: ER Facility (excluding Flu) Costs PMPM
Title: ER Facility (excluding Flu) Costs PMPM 2008-2009 74 Q408 Average $12.41 Q409 Average $13.88 Note: E denotes estimate. The Company is currently in the process of finalizing its results for the fourth quarter and full year 2009. There can be no assurance that the Company’s final audited results
Slide 75: ER Impact - EPS
Title: ER Impact – EPS Incremental over 2008 75 2Q09 ($0.21) ($0.77) 1Q09 4Q09E 3Q09 FY2009E ($0.22) ($0.19) ($0.15) EPS 0 Excluding the flu Note: E denotes estimate. The Company is currently in the process of finalizing its results for the fourth quarter and full year 2009. There can be no assuranc
Slide 76: Length of Enrollment (LOE)
Title: Length of Enrollment (LOE) 76 As length of enrollment increases, the paid PMPM decreases. Costs tend to be higher in the early months of a member’s enrollment history. 2 Note: E denotes estimate. The Company is currently in the process of finalizing its results for the fourth quarter and full
Slide 77: New members and YOY growth
Title: New members and YOY growth 77 Note: E denotes estimate. The Company is currently in the process of finalizing its results for the fourth quarter and full year 2009. There can be no assurance that the Company’s final audited results for the fourth quarter and for fiscal year 2009 will be as sp
Slide 78: Premiums Decreases in 2009
Title: Premiums Decreases in 2009 78 2009 Premium Reductions: Michigan July 1, 2009 reduction linked to fee schedules Missouri Oct 1, 2009 reduction linked to pharmacy benefit ($1.0M) medical margin impact Washington Jan 1, 2009 reduced medical margin ($13.0M) Feb 1, 2009 reduction linked to fee sch
Slide 79: Positive Drivers for 2010
Title: Positive Drivers for 2010 Other Placeholder: Deceleration of enrollment growth Diminished costs from flu Known rate increases79 * G denotes guidance for the MOH Medical Business Unit only. Guidance does not include operations, integration or financing cost related to the HIM transactionPlease
Slide 80: Membership 2008, 2009E and 2010G
80 * E denotes estimate. The Company is currently in the process of finalizing its results for the fourth quarter and full year 2009. There can be no assurance that the Company’s final audited results for the fourth quarter and for fiscal year 2009 will be as specified above. The estimates of FY2009
Slide 81: Rate Changes included in Guidance
Title: Rate Changes included in Guidance* 81 *Guidance for the MOH Medical Business Unit only. Guidance does not include operations, integration or financing cost related to the HIM transaction. 1. New Mexico net impact is unknown, majority of rate reduction is linked to the fee schedule. Please ref
Slide 82: Negative drivers for 2010
Title: Negative drivers for 2010 Other Placeholder: Rx carve-outs No rate increases assumed other than those already in effect January 1, 2010 State budgets squeezed 82 * G denotes guidance for the MOH Medical Business Unit only. Guidance does not include operations, integration or financing cost re
Slide 83: Rx Carve-Outs
Rx Carve-Outs 83 Annualized net reduction in profitability Under pharmacy carve-out initiatives, the state carves out the pharmacy benefit from the MCO contract. Members then receive this benefit through the state’s Fee-For-Service (FFS) program. -$7.0M -$4.0M Ohio Effective 2/1/2010 Missouri Effect
Slide 84: States Under Pressure
84 Title: States Under Pressure For States in which MOH Health Plans participate, state revenues are expected to fall short of their budgets for FY2010. Source: www.statehealthfacts.org Please refer to The Company’s cautionary statement on page 2.
Slide 85: State budgets squeezed
Title: State budgets squeezed 85 Source: Percent change in quarterly state tax revenue, US Census Bureau, 9/30/2009 State tax revenue Please refer to The Company’s cautionary statement on page 2.
Slide 86: What is NOT included in guidance
Title: What is NOT included in guidance Other Placeholder: HIM Expectation that medical initiatives will bear fruit in 2010 No unknown rate decreases No unknown rate increases 86 * G denotes guidance for the MOH Medical Business Unit only. Guidance does not include operations, integration or financi
Slide 87: Seasonality of Earnings
Title: Seasonality of Earnings 87 Note: “Traditionally” denotes the allocation of average earnings from 2002-2008. Guidance is based on estimates for the MOH Medical Business Unit only. Guidance does not include operations, integration or financing cost related to the HIM transaction. California con
Slide 88: 2010 MOH Medical Business Unit Guidance
Title: 2010 MOH Medical Business Unit Guidance 88 Premium Revenue Investment Income Medical Care Ratio G&A Ratio Core G&A Ratio (excluding Premium Tax) Depreciation & Amortization Interest Expense Net Income Diluted EPS Diluted Shares Outstanding $3.9B $9M 86% 11% 7.6% $42.6M $13.8M $39M $1.50 26M 2
Slide 89: Q&A
Q&A ae HEALTHCARE