Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (September 2015)
71 slides from Molina Healthcare's investor day presentation, Sep 17, 2015
Slide 1: Molina Healthcare – Your Extended Family
08 , ry | MOLINA HEALTHCARE ‘Your Extended Family.
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 growth and acquisition expectations and strategies; the clo
Slide 3: Investor Day 2015 Agenda
Investor day 2015B Agenda Approx. Time Topic Speaker 12:30pm-12:35pm Opening Remarks Juan José Orellana, SVP Investor Relations 12:35pm-1:20pm Business Overview J. Mario Molina, MD, Chief Executive Officer 1:20pm-1:35pm Operations Review Terry Bayer, Chief Operating Officer 1:35pm-1:55pm Q&A 1:55pm-
Slide 4: Key investor inquiries
Key investor inquiries How will Molina continue to grow? What’s changing in our space? Why Providence Human Services? What else is expected in 2015? What progress is being made in improving margins?
Slide 5: J. Mario Molina M.D.
J. Mario Molina M.D. President & Chief Executive Officer
Slide 6: Our mission
Our mission To provide quality health care to people receiving government assistance
Slide 7: Our footprint today
Our footprint today Health plan footprint includes 4 of 5 largest Medicaid markets 1. Total enrollment relates to effective membership as of June 30, 2015 Puerto Rico Molina Health plans Molina Medicaid Solutions Direct delivery 3.4M Members 1% Duals 1% Medicare 8% Marketplace USVI 11% ABD 14% Expan
Slide 8: Growth
Growth While growth in the Medicaid program was significant between 2013-2015, steady organic growth is expected over the next five years. 85M 136kMedicaid/CHIP Growth Projections1 82.2M 80.8M 81.5M 80M 79.8M 53k 77.9M 76.3M 21k 66k 75M 135k 72.1M 64k 70M 65M 2013 2014 2015 2016 2017 2018 2019 2020
Slide 9: Where will our growth come from?
Where will our growth come from? 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
Slide 10: Continued organic growth in Medicare-Medicaid Plans (MMP)
Continued organic growth in Medicare-Medicaid Plans (MMP) Dual eligible markets California Illinois USVI Michigan Ohio South Carolina2 Puerto Rico Texas Total Enrollment December August 2014 20151 11K 15K 5K 4K - 8K 2K 10K - <1K - 15K 18K 53K MMP Markets 1. CMS enrollment data as of August, 2. Volun
Slide 11: In-market health plan acquisitions
In-market health plan acquisitions State: Illinois Enrollment: 60,000 Annualized Revenue: $200M State: Michigan Enrollment: 85,000 Annualized Revenue: $270M State: Florida Enrollment: 62,000 Annualized Revenue: $200M State: Florida Enrollment: 25,000 Annualized Revenue: $80M State: Florida Enrollmen
Slide 12: Marketplace
Marketplace 15M Penalty for not having coverage in 2016 is 2.5% of yearly household income or $695 per adult (half for those under 18) USVI Puerto Rico Marketplace operations 230K1 Molina Marketplace Enrollment 18K 2Q2014 Aug 2015 93% of Molina marketplace members receive government subsidies 1. Com
Slide 13: Increasing complexity drives higher spend
Increasing complexity drives higher spend Complex members continue to transition into managed care Number of potential enrollees $ $ Long Term Care Dual Eligible $ Seniors & Persons $ with Disabilities Medicaid Expansion Temporary Assistance to Needy Families
Slide 14: Fee for service remains significant
Fee for service remains significant Managed care organizations and fee for service FY 2011 57M $404B Fee-For-Service 15M 26% $307B 76% Managed Care 42M 74% $97B 24% Medicaid Enrollment 2011 Medicaid Benefit Spending 2011 76% of Medicaid spending remains in Fee-for-Service Sources: 1. Medicaid and CH
Slide 15: Medicaid Long Term Services and Supports (LTSS)
Medicaid Long Term Services and Supports (LTSS) LTSS is a significant portion of fee for service spend 6% People with Serious Mental Illness 30% People with Developmental Disabilities 3% Other/Multiple Populations 61% Older People & People with Physical Disabilities Full Medicaid LTSS Spend in 2012:
Slide 16: Home and Community Based Services
Home and Community Based Services Behavioral and mental health services are significant drivers of cost Medicaid HCBS Expenditures FY 20101 Prevocational services Day habilitation Education services Day treatment/partial hospitalization Adult day health Adult day services Community integration Medic
Slide 17: Molina – changes in spend
Molina – changes in spend Select Categories 2012 vs. 20151 $500M $465M $400M 2015E $335M $330M $300M $200M $160M $110M $100M $80M $0M Specialty Rx Personal Attendant 2 Behavioral Health Services 1. 2015 estimates are based on full year annualized results as extrapolated from the results through the
Slide 18: Capability-based provider acquisitions – changes in delivery
Capability-based provider acquisitions – changes in delivery Increasing Role of Data & Technology Importance of the Member Vertical Integration & Broader Continuum of Care Member Centric Approach Increasing Role of Government as a Payor 2 Value-Based Reimbursement 1 Importance of the Member Member w
Slide 19: Capability-based provider acquisition – behavioral health
Capability-based provider acquisition – behavioral health Providence Human Services1, a multi-state, behavioral/mental health and social services provider Operations in 23 states + DC? Medicaid focus: 80% of revenue Approximately 70% of all contracts are FFS Diverse revenue base: ~100 contracts repr
Slide 20: 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 surpass all physical diseases as a major cause of worldwide disability by 2020 Prevalence of mental illness among the Medicaid population is twice that of the general population 2X-
Slide 21: Molina members with complex conditions
Molina members with complex conditions Top diagnoses by segment by number of admits/cases trailing 12 months1 TANF Diagnoses ABD Diagnoses Dual Eligibles Diagnoses Inpatient Services Delivery Septicemia Septicemia Complications of delivery Schizophrenic disorders Care involving use of rehabilitation
Slide 22: PHS – Adaptable contracting options
PHS – Adaptable contracting options Different regulations/reimbursement policies dictate which services are offered in a particular geography Medicaid Agency Direct Behavioral Managed Care County Office or Behavioral Health Health Specialty Providers Local Organization Specialty Provider Provider In
Slide 23: What services does PHS provide?
What services does PHS provide? More than 80% of revenues are related to services focused on Mental Health1 Other2 10% Autism & Intellectual and Developmental Disabilities 9% Child Welfare 11% Mental Health Child 44% Mental Health Adult 26% 1. Based on Net Adjusted Revenues through 2014 2. Other inc
Slide 24: Autism spectrum disorders (ASD) and Medicaid
Autism spectrum disorders (ASD) and Medicaid 1 in children has been diagnosed with ASD1 72% of Medicaid recipients with ASD had at least 1 additional diagnosis2 CMS advised ASD treatment is considered covered under EPSDT benefits, not just waiver based (2014)3 1. US Centers for Disease Control and P
Slide 25: A growing need in Medicaid
A growing need in Medicaid The Medicaid program finances more than one-quarter of the nation’s spending for behavioral health care and it is, by far, the largest single source of funding for public mental health services. Source: Kaiser Family Foundation. Integrating Physical and Behavioral Health C
Slide 26: An essential benefit
An essential benefit The ACA specifically includes mental health and substance use disorder services as one of the ten categories of required “essential health benefits,” and the law requires parity between the mental and physical health benefits covered by health plans. Source: Kaiser Family Founda
Slide 27: Integration
Integration Nationwide, many state agencies, health plans and providers are implementing PH/BH integration strategies in Medicaid.
Slide 28: A strategic focus identifies greater needs
A strategic focus identifies greater needs The strategic focus leading to Molina’s growth in ABD, Dual Eligible and Long Term Care members is contributing to a higher spend in behavioral/mental heath services.
Slide 29: A new provider capability
A new provider capability PHS revenue is generated by 5,700 client-facing social workers, behavioral/mental health workers, case managers, licensed clinicians, psychologists, nurses and psychiatrists.
Slide 30: Providence acquisition pro-forma footprint
Providence acquisition pro-forma footprint Molina will have a presence in 28 states 2 Commonwealths + Washington D.C. Please refer to the Company’s cautionary statement on page 2 of this presentation Today Molina Health plans Molina Medicaid Solutions Primary Care Direct delivery Virgin Islands Puer
Slide 31: One of a kind
One of a kind Flexible health services portfolio (health plans, direct delivery, MMIS) Focused on people receiving government assistance Scalable administrative infrastructure Consistent national brand Seasoned management team Unique culture
Slide 32: Investor Day – Terry Bayer, Chief Operating Officer
2015B Investor Day Terry Bayer Chief Operating Officer September 17, 2015 / New York, New York
Slide 33: Medicare-Medicaid Plans (MMP)
Medicare-Medicaid Plans (MMP) Dual eligible markets USVI Puerto Rico MMP Markets Enrollment December August 2014 20151 California 11K 15K Illinois 5K 4K Michigan — 8K Ohio 2K 10K South Carolina2 — <1K Texas — 15K Total 18K 53K 1. CMS enrollment data as of August, 2015 2. Voluntary enrollment only as
Slide 34: Medicare – Dual Eligible Special Needs Plan
Medicare – Dual Eligible Special Needs Plan Our DSNP enrollment extends our dual eligible reach beyond just the Medicare Medicaid Plans 40K members USVI Puerto Rico Molina DSNP operations 1. CMS enrollment data as of August, 2015
Slide 35: What's new with the duals
What’s new with the duals All 6 Molina demos have gone live nationally 2 year extension From CMS for existing dual demonstration programs. All 6 of Molina’s states submitted letters of intent before the September 1st deadline CA, IL, OH extended until December 2019 MI, SC, TX extended until December
Slide 36: Marketplace
Marketplace 15M Penalty for not having coverage in 2016 is 2.5% of yearly household income or $695 per adult (half for those under 18) Health Insurance Marketplace 230K members USVI Puerto Rico Marketplace operations 81% of our Marketplace revenue is in the form of subsidies Nationally 84% of Market
Slide 37: Marketplace – staying true to the strategy
Marketplace – staying true to the strategy Priority segment: 100%-250% FPL Medicaid transitioners; parents of CHIP members; ex-Medicaid members; low-income uninsured Heavily subsidized Used to getting care from safety net providers Require enhanced services 100%-250% FPL Annual income levels for ind
Slide 38: Marketplace – staying true to the strategy
Marketplace – staying true to the strategy Example: CA Minimum Wage $9.00per hour $18,720annualized Premium assistance for marketplace is calculated based on the federal poverty scale. Individuals who earn <138% of the FPL qualify for Medicaid. FEDERAL POVERTY LEVELS & INCOME1,2 Size of 133% 138% 15
Slide 39: Puerto Rico
Puerto Rico Molina was awarded Medicaid contracts in two regions in late 2014 San Juan Caguas Ponce Southwest East Commenced operations on April 1, 2015 361,000 members as of 2Q2015 Estimated annualized revenue of $750M Commonwealth continues to pay us weekly and is current
Slide 40: Q&A
Q&A
Slide 41: Investor Day – Joseph White, Chief Accounting Officer
2015B Investor Day Joseph White Chief Accounting Officer September 17, 2015 / New York, New York
Slide 42: 2015 income statement (unaudited)
2015 income statement (unaudited) Please refer to the Company’s cautionary statement on page 2 of this presentation Dollars (in millions) YTD June 2015 FY 2015 Remaining Actual Outlook1 Outlook2 Premium Revenue $6.3B $13.5B $7.2B Health Insurer Fee Revenue $122M $260M $138M Premium Tax Revenue $190M
Slide 43: Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial measures EBITDA and adjusted net income Please refer to the Company’s cautionary statement on page 2 of this presentation. EBITDA YTD June 2015 FY 2015 Remaining Actual Outlook1 Outlook2 Net income $67M $132M $65M Adjustments: Depreciation, and amortization of in
Slide 44: Uncertainties relating to 2nd half earnings
Uncertainties relating to 2nd half earnings Please refer to the Company’s cautionary statement on page 2 of this presentation Issues State MCR floor reconciliation CA, NM, WA Cost plus reconciliation NM Quality revenue TX HIF reimbursement MI PR / MI MMP/ TX MMP / MCR Acquisitions / FL Rates
Slide 45: Profit restrictions are significant
Profit restrictions are significant 85% of Premium revenue earned YTD 6/30/2015 is subject to profit restrictions Marketplace, 6% MMP, 7% Medicaid Expansion, 17% Medicare SNP, 4% Medicaid no restrictions, 15% Medicaid with restrictions, 51% % of revenue subject to profit restrictions: Medicaid: 75%
Slide 46: Payables due to profit restrictions
Payables due to profit restrictions Please refer to the Company’s cautionary statement on page 2 of this presentation Dec-14 Jun-15 Medicaid Expansion: California ~$120M ~$130M New Mexico ~$25M ~$50M Washington ~$240M ~$270M Others — ~$15M Medicaid Expansion Subtotal ~$385M ~$465M Marketplace — ~$40
Slide 47: Marketplace medical care ratio
Marketplace medical care ratio How do we report a Marketplace MCR <80% Six Months Ended June 30, 2015(1) Premium Revenue Medical Care Costs Member Months(2) Total PMPM Total PMPM MCR(3) Medical Margin TANF and CHIP 12,035 $ 2,141,316 $177.93 $ 1,960,315 $162.89 91.5% $ 181,001 Medicaid Expansion 2,6
Slide 48: Different calculations of Marketplace MCR
Different calculations of Marketplace MCR MOH GAAP MCR MOH 10K MCR Medical Care Cost MCR = Premium Revenue Min MCR Calculation Federal Register Vol 78 No. 47; Monday March 11, 2013, Part II, HHS Notice of Benefit and Payment Parameters for 2014, Page 15,505 MCR= [(i + q – s + n – r)/ {(p + s – n + r
Slide 49: Marketplace example - GAAP vs. CMS minimum MCR
Marketplace example - GAAP vs. CMS minimum MCR 4% (1%) 0% 1% 16% 80% 60% 1. GAAP MCR 2. Risk Adjustment / 3. QI Expenses 4. Taxes and Fees 5. Prior Year Adjustments 6. Credibilty Adjustments CMS MLR Corridor and MLR Rebate
Slide 50: Admin ratio – market place and profit restriction impact
Admin ratio – market place and profit restriction impact Impact of lost revenue from profit restrictions Impact of Marketplace fees G&A ratio net of profit restrictions & Marketplace fees 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 10.1% 10.0% 7.9% 7.5% 8.1% 7.2% FY2013 FY2014 YTD-2Q15
Slide 51: Diluted Shares outstanding 2015 (unaudited)
Diluted Shares outstanding 2015 (unaudited) Please refer to the Company’s cautionary statement on page 2 of this presentation 70M 62M1 62M1 1M 1M 60M 56M1 54M 50M 56M 56M 50M 40M 30M 20M 10M 5M 6M M Q1 Q2 Q3 Q4 FY15 Other Shares Outstanding Convertible Note Dilution Totals may not add due to roundin
Slide 52: John C. Molina, Chief Financial Officer
John C. Molina Chief Financial Officer
Slide 53: Acquisition strategy
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 –
Slide 54: A closer look at our health plan acquisitions
A closer look at our health plan acquisitions Recent health plan M&A Please refer to the Company’s cautionary statement on page 2 of this presentation Transaction Status Membership1 Annualized Revenue1 MyCare Chicago Close pending 60,000 $200M Integral Health Plan Close pending 90,000 $250M HealthPl
Slide 55: Florida Medicaid footprint expansion
Florida Medicaid footprint expansion Recent Florida acquisition summary1,2 Pensacola, Tampa & Sarasota service area served by Integral Health Plan December , 2015 90K members Jacksonville service area served by First Coast Advantage December, 2014 62K members Miami-Dade service area served by Molina
Slide 56: Capability-based provider acquisition – behavioral health
Capability-based provider acquisition – behavioral health Providence Human Services1, a multi-state, behavioral/mental health and social services provider Operations in 23 states + DC Medicaid focus: 80% of revenue Approximately 70% of all contracts are FFS Diverse revenue base: ~100 contracts repre
Slide 57: Providence Human Services strategic rationale
Providence Human Services strategic rationale Why Molina Medicaid focus Significantly advances our behavioral/mental health capabilities Builds upon our direct delivery infrastructure Creates market presence in new states relevant to these patients Why PHS Medicaid focus A viable stand alone busines
Slide 58: PHS – Adaptable contracting options
PHS – Adaptable contracting options Different regulations/reimbursement policies dictate which services are offered in a particular geography Medicaid Agency Direct Behavioral Managed Care County Office or Behavioral Health Health Specialty Providers Local Organization Specialty Provider Provider In
Slide 59: What services does PHS provide
What services does PHS provide More than 80% of revenues are related to services focused on Mental Health1 Mental Health Other2 Child 10% 44% Autism & Intellectual and Mental Health Developmental Adult Disabilities 26% 9% Child Welfare 11% 1. Based on Net Adjusted Revenues through 2014 2. Other incl
Slide 60: PHS – net revenue breakdown by payor
PHS – net revenue breakdown by payor Other1 7% Medicaid Intermediaries Medicaid (Government, Direct State and 27% 35% US Agencies) Medicaid 83% 21% Insurance / HMO’s / Other Health Plans Medicaid Intermediaries 10% (Cities and Local Boards) 1. Other includes Educational, Probational, Workforce Devel
Slide 61: 2015 and beyond
2015 and beyond 2013 2014 2015 2016+ INCUBATE TRANSITION & GROW DEVELOP & GROW FORTIFY Acquire new business Transition members into model of Transition members into model of Improve model of care Design systems care care Enhance systems Test readiness Address pent-up demand Address pent-up demand Im
Slide 62: 2017 Financial objectives
2017 Financial objectives Please refer to the Company’s cautionary statement on page 2 of this presentation Revenue growth ~0.5%-1.5% decline in medical cost ratio ~0.5%—1.0% decline in G&A ratio Target: ~1.5%—2.0% after tax margin How will we get there Actuarially sound premium rates Manage inpatie
Slide 63: Premium revenue
Premium revenue We expect 2016 premium revenue to be at least $1.0B higher than in 2015 Please refer to the Company’s cautionary statement on page 2 of this presentation $14.6B $13.5B Full year 2015 Outlook December 2015 Run Rate1 Both numbers are Company estimates 1. Month of December 2015 Annualiz
Slide 64: High cost member intervention
High cost member intervention A look at dual eligibles and ABDs 3% 30% 97% 70% Members Medical Costs 3% of our dual eligible members and 3% of our ABD members account for 30% of our medical costs under each line of business. © 2015 MOLINA HEALTHCARE, INC.
Slide 65: Admin ratio – market place and profit restriction impact
Admin ratio – market place and profit restriction impact Please refer to the Company’s cautionary statement on page 2 of this presentation 12.0% 10.1% 10.0% 7.9% 8.1% 8.0% 6.0% 10.0% 4.0% 49% 7.5% 7.2% 2.0% 0.0% FY2013 FY2014 YTD-2Q15 Admin ratio sensitivity Every $1 billion of incremental revenue:
Slide 66: Investment income
Investment income Interest rate sensitivity on investment income Please refer to the Company’s cautionary statement on page 2 of this presentation Investment Income EPS $35M $ 2.65 $30M $ 2.60 $25M $ 2.55 $20M $ 2.50 $15M $ 2.45 $10M $5M $ 2.40 $0M $ 2.35 0.50% 0.75% 1.00% 1.25% 1.50% Increase in Fe
Slide 67: Effective tax rate
Effective tax rate ETR sensitivity to pretax income1 Please refer to the Company’s cautionary statement on page 2 of this presentation Growing pretax income mitigates the impact of non-deductible expenses, lowering the effective tax rate 100% 95% 90% 80% 70% Tax Rate 60% 57% 50% 45% 40% 30% $100M $2
Slide 68: After tax margin sensitivity
After tax margin sensitivity Each 25bps increase in after tax margin increases EPS by $0.65 Please refer to the Company’s cautionary statement on page 2 of this presentation $10.00 $8.00 $6.00 $5.10 EPS $4.00 EPS $2.35 $2.00 $0.00 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% After Tax Margin Based on 2015 Out
Slide 69: After tax margin
After tax margin Historical and outlook Please refer to the Company’s cautionary statement on page 2 of this presentation 2.0% 2.0% 1.8% 1.6% 1.5% 1.4% 1.2% 1.0% 1.0% 0.8% 0.8% 0.6% 0.6% 0.4% 0.2% 0.0% 2013 2014 June 30, 2015 YTD 2016 2017 Long Term Outlook
Slide 70: Rate changes revisited
Rate changes revisited Please refer to the Company’s cautionary statement on page 2 of this presentation Baseline Outlook 1 State Effective Date Rate Change California Jul-15 +2% Florida Sep-15 +4% Illinois Jul-15 TBD Michigan 8% Oct-15 TBD LTC New Mexico Jan-15 +3% Ohio Jan-15 +1% South Carolina Ju
Slide 71: Q&A
Q&A