Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (February 2016)
75 slides from Molina Healthcare's investor day presentation, Feb 11, 2016
Slide 1: 2016A Investor Day
2016A Investor Day February 11, 2016 / New York, New York
Slide 2: Cautionary Statement
Cautionary Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This slide presentation and our accompanying oral remarks contain numerous “forward-looking statements” regarding, without limitation: our financial outlook and business expectations for 2016; expe
Slide 3: Investor Day Agenda
Investor day 2015A Agenda Approx. Time Topic Speaker 12:30pm-12:35pm Opening Remarks Juan Jos Orellana, SVP Investor Relations J. Mario Molina, MD, Chief Executive Officer; 12:35pm-1:20pm Business Overview, MLTSS and Duals Terry Bayer, Chief Operating Officer 1:20pm-1:35pm Q&A 1:35pm-1:40pm Break 1:
Slide 4: Business Overview
2016A Investor Day Business Overview J. Mario Molina, M.D., President & Chief Executive Officer February 11, 2016 / New York, New York
Slide 5: Our mission
Our mission To provide quality health care to people receiving government assistance 5 2016 MOLINA HEALTHCARE, INC.
Slide 6: Our values
Our values We strive to be an exemplary organization. These are our values: Caring Thrifty Enthusiastic Respectful Focused Value Feedback Accountable We sustain our mission by being profitable. We are one Molina. 6 2016 MOLINA HEALTHCARE, INC.
Slide 7: Product Portfolio: Sticking with our knitting
Medicaid Product Portfolio Sticking with our knitting Medicaid Health Direct Delivery Medical Services Health Plans Information Management Primary Care Behavioral Health Risk-based health plan Medicaid non-risk fee based Company owned and operated Provider network of outcome outsourcing for Medicaid
Slide 8: Our footprint today
Our footprint today Health plan footprint includes 4 of 5 largest Medicaid markets 3.9M1 Members 1% Duals 1% Medicare 10% Marketplace USVI 10% ABD 13% Puerto Rico Expansion 65% TANF & Molina Health plans CHIP Molina Medicaid Solutions Pathways2 Member Mix Primary Care Direct delivery 1. Total enroll
Slide 9: 2015 was a year of great accomplishments
2015 was a year of great accomplishments Last year we made major progress in expanding to new markets and 2015 highlights integrating new programs Michigan Pathways Capital plan re-bid Duals 8 health plan capability execution (MI, SC,TX) acquisition 46% acquisitions announced Puerto revenue growth W
Slide 10: Managing for the long run
Managing for the long run Solid multi-year execution leads to a record year Investor Day 2012B Revenue Goals Investor Day 2016A Revenue Results Total revenue for 2015: $14.1B 10 2016 MOLINA HEALTHCARE, INC.
Slide 11: We continue to make progress
We continue to make progress Earnings are catching up with growth 4M $ 3.00 $16B 3.5M 14.1B $2.57 $12B 3M $ 2.00 9.7B 2.6M $8B $1.29 6.6B $1.13 1.9M 5.9B 2M 1.8M $ 1.00 4.5B 1.6M $4B $ 0.45 $0.21 1M $ 0.00 2011 2012 2013 2014 2015 $0B 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Membership EPS
Slide 12: We manage our day-to-day business to long term goals
We manage our day-to-day business to long term goals Strategic priorities Expand our reach Leverage the Organic growth in existing markets and RFPs core business In-market acquisitions Strengthen operational performance Transition of members and benefits from FFS to Leverage group scale and managed
Slide 13: Our strategy positions us well to respond to major trends
Our strategy positions us well to respond to major trends 1. Long Term Care Services are a managed care opportunity 2. States continue to expand Medicaid 3. Home and Community Based Service (HCBS) costs continue to increase 4. Integration of medical and behavioral health 5. Social determinants of he
Slide 14: How will we continue to grow
How will we continue to grow Organic growth in existing markets and RFPs In-market acquisitions Marketplace Transition of members and benefits from FFS to managed care Capability-based provider acquisitions 14 2016 MOLINA HEALTHCARE, INC.
Slide 15: Medicaid growth
Medicaid growth Steady organic growth is expected to continue over the next five years. Historic Enrollment Growth 136k 85M January 2016 Medicaid/CHIP Growth Projections1 82.2M 80.8M 81.5M 3.9M 80M 53k 79.8M members 77.9M 66k 76.3M 21k 135k 75M 72.1M 64k 70M December 2014 2.6M 65M members 2013 2014
Slide 16: Executing on our strategy: RFPs
Executing on our strategy: RFPs Michigan Successful re-procurement Awarded contracts will Region 1 1 Won all 9 regions bid on1 serve more than 1.7M Expands current geographic footprint by 18 counties beneficiaries across the HealthPlus and HAP Midwest acquisitions add an additional 150K state Region
Slide 17: 60% of Medicaid spending is still in fee for service
60% of Medicaid spending is still in fee for service $500B Medicaid Benefit Spending 2010-2014 $468B $283 Expenditures on Medicaid Long Term Services and Supports $286(LTSS) represent 50% of Medicaid Fee For Service spend. $400B $295 $282 $284 6% 3% $300B People with Other / Serious Multiple Mental
Slide 18: Upcoming RFP opportunities in 2016
Upcoming RFP opportunities in 2016 Oklahoma: ABD Pennsylvania: MLTSS 170K eligibles 340k eligibles statewide, Encompass more than 45% 130k utilizing MLTSS $5.0 billion spent annually of total Medicaid spend of on LTSS $2.4 billion Virginia: MLTSS 120K eligibles $2.1 billion of annual Medicaid spend
Slide 19: Acquisition strategy: How do the pieces fit together
Acquisition strategy How do the pieces fit together New Managed Care State Existing Managed Care State Provider / Capability Rationale Diversification revenue, risk, contracts Fortify competitive position Enhance provider alignment Administrative cost leverage long term Administrative leverage short
Slide 20: Executing on our growth strategy: acquisitions
Executing on our growth strategy: acquisitions 9 acquisitions announced in 2015 May August October In-market acquisitions: generally asset purchases provide greater scale entry to new service areas accretive Michigan Florida Illinois Status: closed Status: closed Status: closed Washington Status: cl
Slide 21: Diagnoses of behavioral and mental health conditions are increasing
Diagnoses of behavioral and mental health conditions are increasing Mental and substance use disorders are expected to 2X surpass all physical diseases as a major cause of worldwide Prevalence of mental illness disability by 2020 among the Medicaid population is twice that of the general population
Slide 22: Introducing Pathways
Introducing Pathways A capability-based provider acquisition Pathways provides a growing number of behavioral health programs and social services to Medicaid beneficiaries throughout the nation. Mental Other1 Health Child 10% 44% Autism & Intellectual and Mental Developmental Health Adult Disabiliti
Slide 23: Medicaid and social services on the horizon
Medicaid and social services on the horizon Social service needs inhibit many lower income individuals from getting better or maintaining good health. CMS has announced a 5-year, $157M program to pilot projects to better link Medicare and Medicaid patients to social services Housing Food insecurity
Slide 24: Home and Community Based Services (HCBS)
Home and Community Based Services (HCBS) Behavioral and mental health services are significant drivers of cost Medicaid HCBS Expenditures1 Adult Day Health Services Community Integration Prevocational Other2 Day Treatment 14% Medical Day Care for Children Group or Shared Living Day Services 24 Hour
Slide 25: Molina HCBS service detail
Molina HCBS service detail Molina 2015 HCBS% Spend 7% Day Services 89% Home -Based Services 4% Other 25 2016 MOLINA HEALTHCARE, INC.
Slide 26: Marketplace
Marketplace Penalty for lack of coverage in 2016 is 2.5% of yearly household income or $695 per adult Please refer to the Companys cautionary statement Leverages existing Medicaid network Continuity for Medicaid members One platinum plan, limited gold Low MCR not sustainable in the long term USVI Pu
Slide 27: Marketplace membership
Marketplace Focused on providing continuity to Medicaid members and extending services to the Medicaid ineligible low-income Molinas Current Membership 410k Distribution By Metal Type Members 2016O 20% 76% <1% 4% Majority enrollment states Bronze Gold Incremental enrollment states Silver Other2 S
Slide 28: One of a kind
One of a kind Adding capabilities that can impact social determinants of health care Focused on people receiving government assistance Scalable administrative infrastructure Consistent Medicaid national brand Experienced management team Mission driven culture 28 2016 MOLINA HEALTHCARE, INC.
Slide 29: MLTSS and Duals
2016A Investor Day MLTSS and Duals Terry Bayer, Chief Operating Officer February 11, 2016 / New York, New York
Slide 30: True Molina Story
True Molina Story Vickie https://www.youtube.com/watchv=oPFB0Sxq_lA 30 2016 MOLINA HEALTHCARE, INC.
Slide 31: Increasing complexity drives higher spend
Increasing complexity drives higher spend Complex members continue to transition into managed care Long Term Care $ $ $ $ $ Dual Eligible $ $ $ $ Seniors & Persons with Disabilities $ $ $ Medicaid Expansion $ $ Temporary Assistance to $ Needy Families Number of potential enrollees 31 2016 MOLINA HEA
Slide 32: What are Managed Long Term Services and Supports
What are Managed Long Term Services and Supports MLTSS Enables an individual to remain in their home or a community based setting, provides services and addresses barriers to social determinants of health. U.S. Medicaid Expenditures for LTSS1 Provides long term care (residential) when needed. 2008-2
Slide 33: Long Term Services and Supports
Long Term Services and Supports Continuum of care management model Medical Behavioral Health Health Services Services LTSS 33 2016 MOLINA HEALTHCARE, INC.
Slide 34: Many paths to MLTSS integration
Many paths to MLTSS integration DSNP+MLTSS MMP MLTSS California Florida Illinois Michigan New Mexico Ohio South Carolina Texas 34 2016 MOLINA HEALTHCARE, INC.
Slide 35: Long Term Services & Supports (LTSS) opportunity
Long Term Services & Supports (LTSS) opportunity Composition of Members Utilizing LTSS Services 23% MMP 59% 18% Mandatory DSNP Medicaid 5% of total members / 20% of fee for service cost in 4Q2015 35 2016 MOLINA HEALTHCARE, INC.
Slide 36: MLTSS opportunities
MLTSS opportunities How will we impact quality and cost Return to the community Remain at home Shorter stay Avoid unnecessary ED visits Reduce hospital admissions Reduce fraud, waste, and abuse 36 2016 MOLINA HEALTHCARE, INC.
Slide 37: MLTSS intervention point: Nursing home
MLTSS Intervention point Nursing home Comprehensive health assessment Integrated care More frequent provider visits Multi-disciplinary team 37 2016 MOLINA HEALTHCARE, INC.
Slide 38: MLTSS intervention point: In home care
MLTSS intervention point In home care Provide support for Activities of Daily Living (ADLs) Meals Transportation Caregivers Multi-disciplinary team 38 2016 MOLINA HEALTHCARE, INC.
Slide 39: MLTSS intervention point: Homeless
MLTSS intervention point Homeless Community connectors outreach Transportation Substance abuse Behavioral health 39 2016 MOLINA HEALTHCARE, INC.
Slide 40: Shift from inpatient care to home-based outpatient care
Shift from inpatient care to home-based outpatient care 40 2016 MOLINA HEALTHCARE, INC.
Slide 41: Nursing home to community transition
Nursing home to community transition Diagnosed with diabetes; cancer in remission Nursing home resident Transitioned home Continues to improve Notes: Images for illustrative purposes only. Not actual patients. 41 2016 MOLINA HEALTHCARE, INC.
Slide 42: Nursing home to community transition
Nursing home to community transition Medical Cost Incurred by Month $8,000 LTSS $6,000 $4,000 Institution Rehabilitation Home $2,000 Medical Costs $0 Mar 2015 May 2015 Jul 2015 Sep 2015 Note: Based on internal Molina claims data. Note: Not actual patient. 42 2016 MOLINA HEALTHCARE, INC.
Slide 43: Nursing home to community transition
Nursing home to community transition Diagnosed with diabetes; bi-polar; depression Nursing home resident for long-term care Continues coverage with Molina for Medicaid funded services Transitioned home Continues to improve Notes: Images for illustrative purposes only. Not actual patients. 43 2016 MO
Slide 44: Nursing home to community transition
Nursing home to community transition Medical Cost Incurred by Month $8,000 $6,000 Institution Home $4,000 $2,000 $0 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Note: Based on internal Molina claims data. Note: Not actual patient. 44 2016 MOLINA HEALTHCARE, INC.
Slide 45: Q&A
eo . Q&A BRRMOUNS
Slide 46: Marketplace FAQ
2016A Investor Day Marketplace FAQ Joseph White, Chief Accounting Officer February 11, 2016 / New York, New York
Slide 47: Marketplace
Marketplace Penalty for lack of coverage in 2016 is 2.5% of yearly household income or $695 per adult Please refer to the Companys cautionary statement Leverages existing Medicaid network Continuity for Medicaid members One platinum plan, limited gold Low MCR not sustainable in the long term Molina
Slide 48: Marketplace attrition
Marketplace attrition Please refer to the Companys cautionary statement 2015 Consolidated Enrollment by Quarter 300K 250K 200K 150K 100K 50K 0K 1Q 2015 2Q 2015 3Q 2015 4Q 2015 We expect similar membership attrition to continue in 2016 48 2016 MOLINA HEALTHCARE, INC.
Slide 49: Marketplace special enrollment
Marketplace special enrollment In 2015, members added during the special enrollment period generated disproportionate costs 2015 Special Enrollment vs. Open Enrollment Membership and MCR Special enrollment allowed within 60 days of specific 10% Special enrollment members events only: Special Enrollm
Slide 50: Marketplace risk adjustment
Marketplace risk adjustment Qtr 1 Qtr 2 Qtr 3 Qtr 4 Member Claims Estimate of year-end risk scores CMS Risk Scores From Prior Years Acturial Consultant Estimates Revised Actuarial Consultant Estimates Revised Actuarial Consultant Estimates Less Certain More Certain Note: Among Molina markets, state
Slide 51: Marketplace risk adjustment
Marketplace risk adjustment Projected risk scores below the industry average imply a risk transfer payable. As the spread between projected MOH & industry risk scores have MOH Risk transfer estimates have increased increased Spread 38 Spread points 53 points Jun1 15 Sept 15 Dec 15 Jun 15 Jul 15 Aug
Slide 52: 2016 Outlook
2016A Investor Day 2016 Outlook John Molina, Chief Financial Officer February 11, 2016 / New York, New York
Slide 53: Cautionary Statement
Cautionary Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This slide presentation and our accompanying oral remarks contain numerous “forward-looking statements” regarding, without limitation: our financial outlook and business expectations for 2016; expe
Slide 54: Key drivers in 2016
Key drivers in 2016 Please refer to the Companys cautionary statement Initial integration of Pathways Growth in Marketplace membership Focus on the care integration and care management opportunity Added interest expense from 5 3/8% notes Integration of acquisitions Will increase revenue by $1.5 bill
Slide 55: Comparison: 2015 actual and 2016 outlook
Comparison 2015 actual and 2016 outlook Please refer to the Companys cautionary statement 2015 2016 Percentage Actual Outlook Change Premium Revenue $13.1B $15.7B 20% Health Insurer Fee revenue $264M $335M 27% Premium Tax Revenue $393M $450M 15% Service Revenue $252M $550M 118% Investment and Other
Slide 56: Adjusted net income
Adjusted net income1 2016 Adjusted net income per diluted share will only add back amortization of intangibles Please refer to the Companys cautionary statement 2015 2016 Actual2 Outlook Net Income $143M $202M Adjustments, net of tax: Amortization of intangible assets $11M $21M Adjusted income from
Slide 57: Revenue by line of business
Revenue by line of business Please refer to the Companys cautionary statement Premium Revenue $16B $15.7B $14B $13.1B $12B $10B $8B $6B $5.3B $4.5B $4.1B $4.4B $4B $2.8B $2.3B $2B $1.4B $1.1B $1.2B $0.7B $0.5B $0.5B $0B Consolidated TANF ABD Medicaid Expansion Marketplace MMP Integrated Medicare All
Slide 58: Acquisition revenue contribution
Acquisition revenue contribution Please refer to the Companys cautionary statement 2016 Acquisitions Effective Date Revenue Contribution Preferred Aug 2015 $50M HealthPlus Sep 2015 $200M Pathways Nov 2015 $360M Integral Nov 2015 $295M Mycare Jan 2016 $120M Loyola Jan 2016 $45M CUP Jan 2016 $180M HAP
Slide 59: Medicaid rate change outlook
Medicaid rate change outlook Please refer to the Companys cautionary statement State 2016 Outlook Known1 2016 Outlook Estimated Effective Date Rate Change Effective Date Rate Change California Jul-15 2% Jul-16 1% Florida Sept-15 5% Sept-16 4% Illinois Jan-16 NA Jan-16 0% Michigan Jan-16(0.5)% Oct -1
Slide 60: Medical care ratio by line of business
Medical care ratio by line of business Please refer to the Companys cautionary statement MedicalCareRatio 100% 94% 95% 95% 92% 92% 92% 89% 88% 90% 89% 85% 80% 79% 80% 74% 60% 40% 20% 0% Consolidated TANF ABD MedicaidExpansion Marketplace MMPIntegratedDual Medicare All Products 2015Actual 2016Outlook
Slide 61: Quality revenue outlook
Quality revenue outlook Please refer to the Companys cautionary statement Historical and current outlook 2016 assumptions $175M $118M 75% $90M Not recognized Recognized 67% Outlook 49% 2014A 2015A 2016O Totals indicate quality revenue available to be earned for the years specified. Earned amounts in
Slide 62: G&A ratio marketplace impact
G&A ratio marketplace impact Exchange fees and broker commissions Please refer to the Companys cautionary statement ImpactofMarketplaceExchangeFeesandBrokerCommissions 12% G&ARatioNetofMarketplaceExchangeFeesandBroker 10.1% Commissions 7.9% 8.2% 8.0% 8% 10.1% 4% 7.9% 7.6% 7.2% 0% 2013Actual 2014Actu
Slide 63: Investment income & interest expense outlook
Investment income & interest expense outlook Please refer to the Companys cautionary statement Investment Income Interest Expense $40M $120M $35M $100M $30M $25M $80M $20M $60M $35M $100M $15M $40M $10M $67.0M $17.8M $5M $20M $0M $0M 2015 Actual 2016 Outlook 2015 Actual 2016 Outlook Average Rate of
Slide 64: Effective tax rate
Effective tax rate ETR sensitivity to pretax income1 Please refer to the Companys cautionary statement Growing pretax income mitigates the impact 64% of non-deductible expenses, lowering the 62% 62% effective tax rate 60% 58% Tax Rate 56% 56% 54% 53% 52% 50% $350M $370M $390M $410M $430M $450M $470M
Slide 65: Share count sensitivity
Share count sensitivity Each one dollar increase in our stock price increases our share count for calculation of EPS by approximately 0.2 million shares Please refer to the Company’s cautionary statement 64.0M 2016 62.0M Outlook 58M 60.0M Shares Count 58.0M Share 56.0M 54.0M 52.0M $60 $61 $62 $63 $6
Slide 66: EPS bridge
EPS bridge Please refer to the Companys cautionary statement Topline Growth & Margin Expansion Share Dilution $1.83($0.17) $3.50 Investment Income & Purchased Interest Expense Intangibles $2.57($0.21) Amortization ($0.18) Depreciation Impact of 162m ($0.21)(Taxes) ($0.13) 2015 2016O 15 2016 MOLINA H
Slide 67: Medical care costs by cost type
Medical care costs by cost type The majority of our margin improvement will come from fee for services costs Please refer to the Companys cautionary statement 2015 Medical Costs by Type Fee for Service Cost Components Direct Delivery, 1% Other, 4% Maternity and Neonates 3% Capitation, 8% Other Inpat
Slide 68: The care management opportunity
The care management opportunity Different interventions target different types of costs Please refer to the Companys cautionary statement Maternity and Hospitalist Program Neonates 3% Transition of Care Enhanced UM Med Surg Other Inpatient PCP Access 12% Transition of Care 23% Emergency Room 11% Oth
Slide 69: Sources of capital
Sources of capital Historical average versus 2015 2006 2014 Average 2015 13% 12% Equity Net Offerings 30% Income 27% Equity Net Income Offerings 60% 58% Long Term Debt Long Term Debt 18 2016 MOLINA HEALTHCARE, INC.
Slide 70: Capital deployment
Capital deployment Historical average versus 2015 2006 2014 Average 2015 14% Capital 26% Expenditures 33% Capital 47% Infusions into Subsidiaries Expenditures Infusions into 9% 39% Share Subsidiaries Cash Paid for Repurchase 32% Acquisitions Cash Paid for Acquisitions 19 2016 MOLINA HEALTHCARE, INC.
Slide 71: Pathways opportunity
Pathways opportunity Please refer to the Companys cautionary statement Expansion of services Molina margin capture Care coordination RFP capture 20 2016 MOLINA HEALTHCARE, INC.
Slide 72: Q&A
eo . Q&A BRRMOUNS
Slide 73: Supplemental
Supplemental 22 2016 MOLINA HEALTHCARE, INC.
Slide 74: EBITDA
EBITDA1 Please refer to the Companys cautionary statement 2015 2016 Actual Outlook Net Income $143M $202M Adjustments Depreciation, and amortization of intangible assets and capitalized software $120M $161M Interest Expense $67M $100M Income Tax Expense $179M $257M EBITDA $509M $720M The Company bel
Slide 75: Medicaid expansion rate change outlook
Medicaid expansion rate change outlook Please refer to the Companys cautionary statement Expansion Rate Outlook State Effective Date Rate Change California Jan-16(13%) Michigan Jan-16 3% New Mexico Jan-16(8%) Ohio Jan-16(7%) Washington Jan-16 5% Wisconsin Jan-16 1 % 24 2016 MOLINA HEALTHCARE, INC.