Molina Healthcare Inc · NYSE:MOH

Molina Healthcare — J.P. Morgan Healthcare Conference 2018

31 slides from Molina Healthcare's conference presentation, Jan 8, 2018

  1. Slide 1: The Plan: Margin Recovery and Sustainability

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . Joe Zubretsky President & Chief Executive Officer January 8, 2018 San Francisco, California J.P. Morgan Healthcare Conference The Plan: Margin Recovery and Sustainability

  2. Slide 2: Cautionary statement

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 2 Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This slide presentation and our accompanying oral remarks contain “forward-looking statements” regarding, without limitation, our numerous margin and performance improve

  3. Slide 3: Molina Healthcare: An accomplished franchise focused on government sponsored programs

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 3 Molina Healthcare: An accomplished franchise focused on government sponsored programs 1. Revenue based on the trailing twelve months (TTM) period ending September, 30, 2017 2. Membership based on enrollment as of September 30, 2017 3. Measurement peri

  4. Slide 4: …but shareholder returns have been unsatisfactory

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 4 …but shareholder returns have been unsatisfactory  Operational infrastructure and effectiveness  Lack of execution on managed care fundamentals  Profit drag of new growth areas including the Marketplace  Challenges managing high acuity populations

  5. Slide 5: Inconsistent performance

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 5 Inconsistent performance Focusing on underperforming business will alone improve margins 1. Profitability and target margin based on internal estimates by line of business and geography for the nine month period ending September 30, 2017 58% 17% 25% A

  6. Slide 6: Building a plan to improve and sustain profitability

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 6 Building a plan to improve and sustain profitability What gives us the confidence that we can succeed? Based on publically available financial filings 0.0% 1.0% 2.0% 2013 2014 2015 2016 Molina Peer 1 Peer 2 After-Tax Margins MOH vs Peers  Peers are p

  7. Slide 7: Molina's Margin Recovery and Sustainability Plan

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 7 Molina’s Margin Recovery and Sustainability Plan: 2 3 1 Restore margins through operational improvements and managed care fundamentals Optimize revenue base for profitability and future revenue growth Enhance balance sheet and capital management disci

  8. Slide 8: Molina's Margin Recovery and Sustainability Plan

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 8 Molina’s Margin Recovery and Sustainability Plan: 2 3 1 Restore margins through operational improvements and managed care fundamentals Optimize revenue base for profitability and future revenue growth Enhance balance sheet and capital management disci

  9. Slide 9: Margin recovery and sustainability: cost rationalization

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 9 Margin recovery and sustainability Significant cost rationalization commenced and will continue:  Organizational spans of control and management layers  Implement salary bands and job families  Eliminate or combine under-scaled operations  Impleme

  10. Slide 10: Margin recovery and sustainability: Reconfiguring the organization

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 10 Margin recovery and sustainability Reconfiguring the organization  Reduced headcount by approximately 1,750 employees or 12% of the total workforce  Reduced the number of management layers across the organization from 12 to 8  Increased average sp

  11. Slide 11: Restructuring savings executed to date

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 11 Margin recovery and sustainability Restructuring savings executed to date SG&A and Admin savings based on internal company estimates through December 31, 2017 1. Approximately $100M of 2018 annualized savings from org redesign is classified as medica

  12. Slide 12: Opportunity to simplify networks

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 12 Margin recovery and sustainability Opportunity to simplify networks that are too wide, too costly, and not tightly controlled  Terminate or renegotiate high cost providers  Narrow network in certain geographies  Stop-loss thresholds and carve-outs

  13. Slide 13: Utilization review and care management must be more effective

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 13 Margin recovery and sustainability Utilization review and care management must be more effective  Specialist referrals  Pre-authorization  Effective concurrent review  High acuity populations and high utilizers of service  Emergency room utiliza

  14. Slide 14: Membership acuity and morbidity must be properly reflected in risk scores

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 14 Margin recovery and sustainability Membership acuity and morbidity must be properly reflected in risk scores  More effective engagement in state rate setting  Improve STAR ratings  Increase retention of Quality Revenue Withhold With proper focus o

  15. Slide 15: Our claims payment function must be significantly improved

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 15 Margin recovery and sustainability Our claims payment function must be significantly improved Areas that can be significantly improved:  Provider experience  Payment accuracy  Oversight of fraud waste and abuse SG&A Network Utilization and Care Ma

  16. Slide 16: All opportunities for operational efficiencies will be considered

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 16 Margin recovery and sustainability All opportunities for operational efficiencies and margin improvement will be considered  Standardize instances of administrative platform  Streamline operations and procedures  Evaluate potential co-sourcing and

  17. Slide 17: Molina's Margin Recovery and Sustainability Plan

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 17 Molina’s Margin Recovery and Sustainability Plan: 2 3 1 Restore margins through operational improvements and managed care fundamentals Optimize revenue base for profitability and future revenue growth Enhance balance sheet and capital management disc

  18. Slide 18: Focus on defending existing revenue

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 18 Focus on defending existing revenue May 2017 August 2017 Expected 1Q 2018 Submitted Submitted In Process June 2017  Strong track record of winning reprocurements  Continue to invest in RFP team and capabilities  Ensure successful launch of Mississ

  19. Slide 19: Focus on defending existing revenue

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 19 Focus on defending existing revenue May 2017 August 2017 Awarded Upcoming Successful retention will require:  Excellent past performance  Value-based contracting  Ability to manage high acuity populations  Managing substance abuse and other behav

  20. Slide 20: Profit is our main focus, not additional revenue

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 20 Profit is our main focus, not additional revenue We will consider opportunistic revenue growth only if specific parameters are met 1. Trailing twelve months (TTM) total revenue is for the 12 month period ending September 30, 2017 $6.6B $9.7B $14.2B $

  21. Slide 21: Diverse revenue base with opportunity for significant performance improvement

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 21 Diverse revenue base with opportunity for significant performance improvement 1. Geographies and lines of business as of January 1, 2018 2. Revenue based on annualized premium revenue for the 3 months ending September 30, 2017 Geographies by Lines of

  22. Slide 22: Decisive action taken with Marketplace

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 22 Decisive action taken with Marketplace Reducing our Marketplace exposure and volatility 1. The 2018E average premium increase includes an increase for the removal of CSRs in 2018 2. Beginning membership and annual revenue for 2018 are estimates Molin

  23. Slide 23: Molina's Margin Recovery and Sustainability Plan

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 23 Molina’s Margin Recovery and Sustainability Plan: 2 3 1 Restore margins through operational improvements and managed care fundamentals Optimize revenue base for profitability and future revenue growth Enhance balance sheet and capital management disc

  24. Slide 24: Enhance balance sheet and capital management discipline

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 24 Enhance balance sheet and capital management discipline  Reserving accuracy  Increase tangible net equity  Reduce cost of borrowing  Maximize dividend capacity of subsidiaries  Maximize parent company liquidity and cash flow  Deploy excess capi

  25. Slide 25: Enhance balance sheet and capital management discipline

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 25 Enhance balance sheet and capital management discipline 1. Average risk based capital (RBC) includes all health plans including those that do not file with the National Association of Commissioners (NAIC) – California and New York Building Subsidiary

  26. Slide 26: What we are doing today

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 26 What we are doing today  Focus on operational improvements and SG&A levers  Evaluation of all lines of business in all geographies  Review balance sheet quality and capital structure  Evaluation of operating model, organizational structure and ta

  27. Slide 27: Re-baselining our business

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 27 Re-baselining our business The 2018 plan will include underwriting margin and administrative cost improvements in addition to these one time items One-time adjustments for the nine month period ending September 30, 2017 1. Prior period medical cost i

  28. Slide 28: What you can expect from us

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 28 What you can expect from us Three-year high level preliminary assessment 2018 re-baseline Year 1 Year 2 Year 3 Revenue growth  Reduction in Marketplace footprint  Stable; implement portfolio decisions  Accretive expansion in select new and existin

  29. Slide 29: Molina's Margin Recovery and Sustainability Plan

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 29 Molina’s Margin Recovery and Sustainability Plan:  Focus on operational improvements and SG&A levers  Evaluation of all lines of business in all geographies  Review balance sheet quality and capital structure  Evaluation of operating model, organ

  30. Slide 30: Thank you

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 30 Thank you

  31. Slide 31: Reconciliation of non-GAAP financial measures

    © 2018 MOLINA HEALTHCARE, INC. 2018 LI L , I . 31 Reconciliation of non-GAAP financial measures One-time adjustments for the nine month period ending September 30, 2017 1. Prior period medical cost impact estimate is based on period ending fee for service IBNP as of December 31, 2016 YTD September 3

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