Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (September 2014)
71 slides from Molina Healthcare's investor day presentation, Sep 18, 2014
Slide 1: Investor Day 2014
Exhibit 99.1 Investor Day 2014B September 18, 2014 New York, New York
Slide 2: Cautionary Statement
Cautionary Statement 2 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 to: our 2014 financial guidance; our revenue, revenue mix, an
Slide 3: Today
Today 3 Approx. Time Topic Speaker 12:30pm-12:35pm Opening Remarks Juan José Orellana, SVP Investor Relations 12:35pm-1:10pm Business Overview Dr. J. Mario Molina, Chief Executive Officer 1:10pm-1:45pm Operations Discussion Terry Bayer, Chief Operating Officer 1:45pm-2:00pm Q&A 2:00pm-2:15pm Break 2
Slide 4: Business Overview
Business Overview J. Mario Molina, M.D. President & Chief Executive Officer September 18, 2014 New York, New York
Slide 5: Presence in Key Medicaid Markets
Presence in Key Medicaid Markets 5 Health Plan footprint includes 4 of 5 largest Medicaid Markets Health Plan Enrollment as of June 2014 WA 461K ME ID WI 85K MI 244K NJ IL OH Health Plan Enrollment UT 302K 83K 6K by Product CA WV VA USVI 455K Medicare 2% Marketplace CHIP 1% NM SC 3% 195K 119K Aged,
Slide 6: 2014 Update – Short Term
2014 Update – Short Term 6 Please refer to the Company’s cautionary statements. Medicare-Medicaid plan (MMP) program delay – Michigan MMP enrollment on track TX Quality Revenue not yet recognized Delays in recognition and collection of Health Insurer Fee (HIF) reimbursement Medicaid expansion enroll
Slide 7: Affordable Care Act – Effect on MOH after 6 Months
Affordable Care Act – Effect on MOH after 6 Months 7 Medicaid Expansion Marketplace Enrollment TANF & Welcome Mat Enrollment Enrollment in California, Florida, Michigan, New Mexico, Ohio, Texas, Effect Enrollment from Molina States Utah, Washington and Wisconsin Medicaid TANF Enrollment from Molina
Slide 8: Medicaid Expansion
Medicaid Expansion 8 Enrollment Demographic Profile1 TANF Medicaid Expansion Seniors & Persons with Enrollment 1.5 Million Average age: 14 Enrollment 241K Average age: 40 Disabilities Enrollment: 227K Average age: 42 78% 41% 25% 30% 24% 15% 19% 17% 5% 9% 8% 1% 0% 0% 7% 12% 9% 0% age age age Gender M
Slide 9: Medicaid Expansion
Medicaid Expansion 9 1 Medical Spending Profile by Service Category TANF Medicaid Expansion Seniors & Persons with Enrollment 1.5 Million Average age: 14 Enrollment 241K Average age: 40 Disabilities Enrollment: 227K Average age: 42 32% 28% 26% 25% 24% 19% 18% 16% 12%12% 11% 14%12% 10% 10% 7% 12% 4%
Slide 10: Medicaid Expansion
Medicaid Expansion 10 1 Pharmacy Spending Profile Top 10 Drugs by Spend TANF Medicaid Expansion Seniors & Persons with Enrollment 1.5 Million Average age: 14 Enrollment 241K Average age: 40 Disabilities Enrollment: 227K Average age: 42 3% ProAir HFA 7% Lantus 5% Abilify 3% Abilify 3% Abilify 3% Lant
Slide 11: ACA Medicaid Expansion Demographics vs. Actual Experience
ACA Medicaid Expansion Demographics vs. Actual Experience 11 1 2 Urban Institute Medicaid Expansion Seniors & Persons 2 with Demographic expectations prior to Actual enrollment experience Disabilities implementation of the Affordable Enrollment 241K Care Act Average age: 40 Molina actual enrollment
Slide 12: 2014 Update – Long Term
2014 Update – Long Term 12 Please refer to the Company’s cautionary statements. Molina is transforming from an acute care company to a chronic care company. Business requirements are changing as we take on more complex patients. © 2014 Molina Healthcare, Inc.
Slide 13: Molina Footprint
Molina Footprint 13 Please refer to the Company’s cautionary statements. 1980: Molina Healthcare is born… 2010: Molina offers services through Molina Medicaid 2003: Molina becomes publicly traded on the Solutions… New York Stock Exchange… 2014: Molina launches MMP Demos in three states… 2008: Molina
Slide 14: Medicaid Enrollment and Spending
Medicaid Enrollment and Spending 14 Managed Care Organizations (MCOs) and Fee-For-Service (FFS) Medicaid Enrollment and Spending FY 2011 57M $407B 15M 26% FFS 77% MCOs $315B 42M 74% $92B 23% Medicaid Enrollment 2011 Medicaid Spend 2011 While most Enrollees are in Managed Care, most Medicaid Spending
Slide 15: Growing Long-Term Care Needs
Growing Long-Term Care Needs 15 Medicaid Long-Term Services and Supports Expenditures 2007-2012 1 $139B $140B $140B $131B $123B $113B 41% 43% 45% 48% 48% 50% 59% 57% 55% 52% 52% 50% 2007 2008 2009 2010 2011 2012 Institutional-Based Care Home & Community-Based Care 1. Truven Health Analytics. ‘Medica
Slide 16: Medicaid Long-Term Services and Supports (LTSS)
Medicaid Long-Term Services and Supports (LTSS) 16 Other/Multiple Populations People with 3% Serious Mental Illness 6% People with Developmental 30% Disabilities 61% Older People & People with Physical Disabilities Full Medicaid LTSS spend in 2012: $140B 1. Truven Health Analytics. ‘Medicaid Expendi
Slide 17: Medicaid HCBS as % of LTSS Spending
Medicaid Home and Community-Based Services (HCBS) as % of LTSS Spending 17 Medicaid HCBS as Percent of Total Medicaid LTSS Expenditures 1 FY 1995 – FY 2012 60% 48%48%50% 50% 45% 43% 41% 39% 36%37% 40% 33% 30%30% 26%27% 30% 24%25% 18%19% 20% 10% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 20
Slide 18: Medicaid Home and Community-Based Services (HCBS)
Medicaid Home and Community-Based Services (HCBS) 18 Other/Multiple Populations People with 6% Serious Mental Illness 4% Older People & People with Physical Disabilities 42% People with 48% Developmental Disabilities Medicaid HCBS total spend in 2012: $69B 1. Truven Health Analytics. ‘Medicaid Expen
Slide 19: Medicaid Home and Community-Based Services (HCBS)
Medicaid Home and Community-Based Services (HCBS) 19 Medicaid expenditures for long-term care services have gradually shifted from institutional-based care to home and community-based care. Medicaid HCBS Expenditures FY 2010 1 Other 2 Prevocational services Day habilitation 14% Education services Da
Slide 20: Molina LTSS Footprint – as of September 2014
Molina Long Term Services & Support (LTSS) Footprint – as of September 2014 20 OH IL CA NM TX FL Service Areas: MMP Demonstrations LTSS ”Stand Alone” LTSS and Acute Care Home and Community-Based Services (HCBS) © 2014 Molina Healthcare, Inc.
Slide 21: LTSS Continuum of Care Management Model
Long Term Services & Supports Continuum of Care Management Model 21 Medical Behavioral Health Health Services Services LTSS © 2014 Molina Healthcare, Inc.
Slide 22: Molina Long Term Model of Care
Molina Long Term Model of Care 22 Functional Elements © 2014 Molina Healthcare, Inc.
Slide 23: Strategic Priorities
Strategic Priorities 23 Mission Priorities Manage our growth Organic growth Medicaid expansion Dual eligible population RFPs Leverage our business portfolio Health plan business MMS Direct delivery Our mission is to provide quality Strive for operational excellence health services to financially Qua
Slide 24: © 2014 Molina Healthcare, Inc.
24 © 2014 Molina Healthcare, Inc.
Slide 25: Operations Discussion
Operations Discussion Terry Bayer Chief Operating Officer September 18, 2014 New York, New York
Slide 26: Molina Healthcare of Florida: Service Areas – Yesterday
Molina Healthcare of Florida: Service Areas 26 Yesterday Pre-Florida Medicaid Managed Care (MMA) and Long Term Care… Seminole Osceola Pasco Polk Hillsborough Pinellas Service Areas: Highlands Manatee Hardee Pre-Florida MMA Palm Long Term Beach Care Broward Miami- Monroe Dade © 2014 Molina Healthcare
Slide 27: Molina Healthcare of Florida: Service Areas – Today
Molina Healthcare of Florida: Service Areas 27 Today Long Term Care, Florida MMA and Healthy Palm Beaches Acquisition… Seminole Orange Pasco Osceola Polk Brevard Hillsborough Indian Pinellas River Service Areas: Highlands St. Lucie Manatee Hardee Long Term Care Martin Palm Florida MMA – Beach Region
Slide 28: Molina Healthcare of Florida: Closed Acquisition
Molina Healthcare of Florida: Closed Acquisition 28 st On August 1 , Molina acquired Medicaid business assets of a Florida health plan, Healthy Palm Beaches Approximately 11,500 members in Palm Beach County transferred over effective August 1, 2014 Members transitioned into Molina as part of the Flo
Slide 29: Molina Healthcare of Florida: Service Areas – Tomorrow
Molina Healthcare of Florida: Service Areas 29 Tomorrow Long Term Care, Florida MMA, and New Acquisitions 1,2… Nassau Duval Baker Clay Flage r Volusia Seminole Orange Osceola Pasco Polk Brevard Hillsborough Indian Pinellas River Service Areas: Highlands St. Lucie Manatee Hardee Long Term Care Martin
Slide 30: Molina Healthcare of Florida: Pending Acquisition
Molina Healthcare of Florida: Pending Acquisition 30 On August 8 th, Molina agreed to acquire certain assets of a Florida health plan, First Coast Advantage Approximately 65,500 individuals eligible for transfer to Molina 1 Anticipated effective date of December 1, 2014 Will assume First Coast Advan
Slide 31: Molina Healthcare of Florida: Program Implementations
Molina Healthcare of Florida: Program Implementations 31 Covered lives and implementation dates Region 4 Region 5 Region 6 Region 7 Region 9 Region 9 Region 11 Region 11 Florida Florida MMA Long Term Long Term Florida Florida MMA Florida Long Term Program Type Care Care MMA MMA MMA4 Care4 (through (
Slide 32: Molina Healthcare of Florida: Medical Care Ratio YoY Comparison
Molina Healthcare of Florida: Medical Care Ratio YoY Comparison 32 Molina Healthcare of Molina Healthcare of Florida Florida Medical Care Ratio _ Medical Care Ratio _ All Products Excluding Long Term Care 90.2% 84.4% 84.4% 84.8% 2Q YTD 2013 2Q YTD 2014 2Q YTD 2013 2Q YTD 2014 Same Store MCR remains
Slide 33: Molina Medicare-Medicaid Plan (MMP) Update
Molina Medicare-Medicaid Plan (MMP) Update 33 Enrollment in MMP demos 15K 1 California opt-out rate 50% Enrollment tracking with expectations 1. Enrollment figure as of September 5 th, 2014. © 2014 Molina Healthcare, Inc.
Slide 34: MMP Demonstrations – National View as of June 2014
MMP Demonstrations – National View as of June 2014 34 Over two dozen states submitted applications, with ten states participating in the MMP demonstration WA VT OR MN MA ID WI MI RI IA OH CT IL CA CO MO VA TN NC AZ OK NM SC Capitated model – No MOU TX MFFS model – No MOU Capitated Demo – Started 201
Slide 35: Molina MMP Footprint
Molina MMP Footprint 35 MI OH IL CA SC Contracts awarded to MOH TX Demonstration is ‘Live’ © 2014 Molina Healthcare, Inc.
Slide 36: The MMP Opaque Crystal Ball…
The MMP Opaque Crystal Ball… 36 © 2014 Molina Healthcare, Inc.
Slide 37: MMP – Lessons Learned from “Go Live”
MMP – Lessons Learned from “Go Live” 37 Enrollment Files Lack of common data elements Contact Centers Call volume trending lower than expected Provider and members call to clarify benefits Average talk time 10 minutes Contract Management Team (CMT) Weekly or monthly and vary by state Includes repres
Slide 38: MMP – Lessons Learned from “Go Live”
MMP – Lessons Learned from “Go Live” 38 Health Risk Assessments & Initial Care Plans Large numbers and compressed time frames Member Contact and Engagement Passive enrollment limits opportunity to engage member Difficult to schedule assessment Bad phone numbers and addresses Reaching Members Mining
Slide 39: What Else is New Beyond the 2nd Quarter?
nd What Else is New Beyond the 2 Quarter? 39 Ohio Medicaid expansion Michigan Medicaid expansion Illinois new TANF members effective August 2014 © 2014 Molina Healthcare, Inc.
Slide 40: Caring for the Dual Eligible
Caring for the Dual Eligible 40 Shift from Acute Care company to a Chronic Care company Two Ends of the Continuum TANF Duals Demographics 1 Breaks in eligibility More continuous Episodic care eligibility Over Over Chronic illnesses Pregnancy Age 65 Age 65 Greater ethnic diversity 25% 62% Behavioral
Slide 41: Shift of Care Model from Inpatient Care to Home-Based Outpatient Care
Shift of Care Model from Inpatient Care to Home-Based Outpatient Care 41 © 2014 Molina Healthcare, Inc.
Slide 42: Improving the Member Experience – Case Study
Improving the Member Experience – Case Study 42 54 year-old woman, homeless with behavioral health issues, unreachable for health risk assessment. Image for illustrative purposes only. Not actual patients. © 2014 Molina Healthcare, Inc.
Slide 43: Improving the Member Experience – Case Study
Improving the Member Experience – Case Study 43 52 year-old woman, with COPD, diabetes, high blood pressure, stroke with paralysis. Image for illustrative purposes only. Not actual patients. © 2014 Molina Healthcare, Inc.
Slide 44: LTSS Continuum of Care Management Model
Long Term Services & Supports Continuum of Care Management Model 44 Medical Behavioral Health Health Services Services LTSS © 2014 Molina Healthcare, Inc.
Slide 45: Q&A
Q&A 45 © 2014 Molina Healthcare, Inc.
Slide 46: Recent Financing Transactions
Recent Financing Transactions Joseph White Chief Accounting Officer September 18, 2014 New York, New York
Slide 47: Convertible Note Exchange and Issuance
Convertible Note Exchange and Issuance 47 Please refer to the Company’s cautionary statements. $301,551,000 September 2014 $302M Convertible Debt ($177M+$125M) Underlying shares 5.2 million 1.625% coupon 30% conversion premium ($58.09 per share) 1.625% Convertible Senior Notes due 2044 No call sprea
Slide 48: 2044 Convertible Notes – Summary of Execution
2044 Convertible Notes- Summary of Execution 48 Please refer to the Company’s cautionary statements. Exchange New Issuance 1. $176.6M of the 2014 notes exchanged, maturing in 1. An additional $125M of 2044 notes were issued to new 2044 investors 2. 2014 note holders exchanging their notes for 2044 n
Slide 49: MOH Convertible Debt Exchange
MOH Convertible Debt Exchange 49 Basic terms summary – 1.125% 2020 notes vs. 1.625% 2044 notes Please refer to the Company’s cautionary statements. 2020 Notes 2044 Notes Principal Amount $550.0M $301.6M Coupon rate 1.125% 1.625% GAAP Interest rate 6% 5% Call spread Yes No Contingent interest No Yes
Slide 50: Cost of Capital Comparison
Cost of Capital Comparison 50 Molina CPDI convertible due 2044 Please refer to the Company’s cautionary statements. 1 After Tax Cost of Capital 10% CPDI Convertible (1.625% up 30%) 9% Straight Debt (6.00% coupon area, pre-tax) Convertible vs Straight Debt Break-even Stock price: $70.60 8% CAGR: 11.8
Slide 51: Cost of Capital Comparison
Cost of Capital Comparison 51 Molina Convertible & Call Spread Due 2020 Please refer to the Company’s cautionary statements. 1 After Tax Cost of Capital 10% 1.125% Convertible + Call Spread + 75% 9% Straight Debt (6.00% coupon area, pre-tax) Convertible vs Straight Debt Break-even Stock price: $62.9
Slide 52: Incremental Interest Impact of New Convert
Incremental Interest Impact of New Convert 52 Please refer to the Company’s cautionary statements. EPS $0.1 $0.05 Cash $0.03 $0.07 Non-cash $0.01 3Q 4Q Annualized Interest expense for the 2044 notes exchanged for 2014 notes began accruing effective 9/5/2014 Interest expense for the additional 2044 n
Slide 53: Estimated Shares Outstanding – 2nd half 2014
nd Estimated Shares Outstanding – 2 half 2014 53 Bridge from 12/31/2013 to 12/31/2014 Year ended (In thousands) 12/31/2014 Shares outstanding at the beginning of the period 45,871 Shares issued: 3.75% Senior Notes 1,784 Employee equity incentives and other 945 Subtotal, estimated shares outstanding
Slide 54: Q&A
Q&A 54 © 2014 Molina Healthcare, Inc.
Slide 55: Financial Discussion
Financial Discussion John Molina Chief Financial Officer September 18, 2014 New York, New York
Slide 56: Base Rate Update
Base Rate Update 56 FINAL State Effective Date Rate Change Notes Normalized for -3% benefit change California Jul-14 +5.5% Excludes Medicaid Expansion1 Florida Jul-14 NA MMA New Rates / Regions Illinois Jul-14 +2.5% Michigan Oct-14 -2.5% to +3.5% Rate Ranges (Low / High) Normalized for +6% fee sched
Slide 57: WA Overpayment and Member Assignment Settlements
WA Overpayment and Member Assignment Settlements 57 September 2014 Item 1 - Molina agrees to pay $19M to the state to adjust premiums for two rate-related issues for the period 7/1/2012 to 12/31/2013 Item 2 - State agrees to pay Molina $8M to adjust premiums for member assignment issues for the peri
Slide 58: Health Insurer Fee (HIF) Reimbursement Update
Health Insurer Fee (HIF) Reimbursement Update 58 Please refer to the Company’s cautionary statements. Total Health Insurer Fee (HIF) on Medicaid revenue approximately $80M due September 30th, 2014 Lack of tax deductibility requires revenue of $130M Contractual agreements in hand representing approxi
Slide 59: Texas Quality Revenue
Texas Quality Revenue 59 $35M of 2014 revenue based on quality measures Many quality measures are new this year Calculation of performance is complex and subject to interpretation State has not released its calculation of 2013 performance Molina will compare its 2013 calculations to those released b
Slide 60: What Admin Leverage May Do for MOH in Q3 and Q4 of 2014
What Admin Leverage May Do for MOH in Q3 and Q4 of 2014 60 Please refer to the Company’s cautionary statements. 1 G&A Expense 2 1H14 2H14 Total revenue $4.4B $5.5B G&A expenses $381M $430M G&A ratio 8.7% 7.7% nd st 2 half admin at 1 half G&A ratio $480M nd 2 half admin at projected G&A $430M ratio n
Slide 61: Delays in Revenue Recognition Distort Normal Seasonality
Delays in Revenue Recognition Distort Normal 61 Seasonality Please refer to the Company’s cautionary statements. Adjusted Net Income Per Diluted Share, Continuing Operations, with Health Insurer Fee (HIF) and TX Quality Revenue Reimbursement Add-Backs 1 Q2 YTD reported Adjusted EPS $1.35 + HIF reven
Slide 62: Expected Financial Performance – Q3 2014 vs. Q4 2014
Expected Financial Performance – Q3 2014 vs. Q4 2014 62 Substantial uncertainty around Q3 results Delays in revenue recognition may continue Delayed recognition of the Health Insurer Delays in recognition of Texas quality Fee (HIF) reimbursement may reduce revenue may reduce third quarter GAAP third
Slide 63: 2014 Guidance – What’s In and What’s Out
2014 Guidance – What’s In and What’s Out 63 Please refer to the Company’s cautionary statements. Includes Full Reimbursement of ACA Health Insurer Fee (HIF) Full Reimbursement of TX Quality Revenue Excludes Increased dilution from convertible debt due to higher than anticipated share price Washingto
Slide 64: Levers for Improved Profitability
Levers for Improved Profitability 64 Please refer to the Company’s cautionary statements. Rate increases that reach the mid-point of actuarial ranges Rates that adequately compensate health plans for new drugs/ new procedures / new technologies More cost effective delivery of medical care and other
Slide 65: Convertible Note Exchange and Issuance Update
Convertible Note Exchange and Issuance Update 65 Please refer to the Company’s cautionary statements. $301,551,000 September 2014 $302M Convertible Debt ($177M+$125M) Underlying shares 5.2 million 1.625% coupon 30% conversion premium ($58.09 per share) 1.625% Convertible Senior Notes due 2044 No cal
Slide 66: Capital and Revenue Capacity
Capital and Revenue Capacity 66 Please refer to the Company’s cautionary statements. Estimated Net Worth Revenue Capacity Caveats: 1 12/31/14 12/31/14 Regulators may require maintenance of net worth in $18.0B excess of minimum Excess Revenue requirements Capacity (Parent) Capital demands on health p
Slide 67: Q&A
Q&A 67 © 2014 Molina Healthcare, Inc.
Slide 68: Appendix
Appendix 68 © 2014 Molina Healthcare, Inc.
Slide 69: Glossary of Long Term Care Terminology
Glossary of Long Term Care Terminology 69 Long Term Care Services & Supports (LTSS) Refers to services and supports that assist individuals with performing activities of daily living and instrumental activities of daily living. These range from providing assistance with eating, dressing, and toileti
Slide 70: GAAP reconciliation to Adjusted EPS
GAAP reconciliation to Adjusted EPS 70 Please refer to the Company’s cautionary statements. The following table reconciles net income per diluted share, continuing operations, to adjusted net income per diluted share, continuing operations, with Health Insurer Fee (HIF) and Texas Quality Revenue add
Slide 71: Status of Reimbursement – ACA Health Insurer Fee (HIF) in Molina States
Status of Reimbursement – ACA Health Insurer Fee (HIF) in Molina States 71 Please refer to the Company’s cautionary statements. Our guidance assumes the HIF and related tax effects will be fully reimbursed in all states. Revenue Comments ACA Fee Gross Up Revenue Recognized 06/30/14 Health plan has r