Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (February 2014)
59 slides from Molina Healthcare's investor day presentation, Feb 13, 2014
Slide 1: Investor Day 2014
Investor Day 2014A February 13, 2014 New York, New York Exhibit 99.2
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 guidance; our revenue, revenue mix, and members
Slide 3: Agenda: Approx. Time, Topic, Speaker
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 Medical Margin: Results & Initiatives Terry Bayer, Chief Operating Officer 1:45pm-2:00pm Q&A 2:00pm-2:15pm
Slide 4: Business Overview
Business Overview J. Mario Molina, M.D. President & Chief Executive Officer February 13, 2014 New York, New York
Slide 5: Presence in Key Medicaid Markets
Presence in Key Medicaid Markets 1. Reflects preliminary enrollment figures. 2. As of September 1, 2013, Illinois health plan began serving ABD members. 3. As of January 1, 2014, South Carolina health plan began serving South Carolina Medicaid members, as a result of the South Carolina Solutions ass
Slide 6: Health Plan Enrollment Growth
Health Plan Enrollment Growth (in thousands) Molina Healthcare Health Plan Enrollment Growth Dec 2013 - Feb 2014 (1) (2) Enrollment grew 11% since December 2013 1. February 2014 enrollment based on preliminary figures. 2. As of January 1, 2014, South Carolina health plan began serving South Carolina
Slide 7: Long Term Revenue Growth
Long Term Revenue Growth Estimated potential revenue run-rate by year-end 2015 Please refer to the Company’s cautionary statements. 1. Estimated amounts are subject to change. 2. Includes revenue estimates from: New Mexico (Lovelace), and South Carolina (Community Health Solutions assets) acquisitio
Slide 8: Revenue by Product
Revenue by Product Revenue shift to chronic care is changing our medical cost profile Please refer to the Company’s cautionary statements. 1. For 2014, TANF includes Medicaid expansion and Marketplace lives.
Slide 9: Shift from an Acute Care Company to a Chronic Care Company
Shift from an Acute Care Company to a Chronic Care Company Business requirements are changing as we take on more complex patients Member retention Emphasis on quality and ratings Reduction of unnecessary utilization Risk adjustment
Slide 10: Health Plan Footprint & Planned Growth
WA CA UT NM TX IL MI WI OH SC FL Health Plan Footprint & Planned Growth Fully Integrated Dual Eligible Pilots Long Term Care Medicaid Health Plan Markets Please refer to the Company’s cautionary statements.
Slide 11: Molina Healthcare
HEALTHCARE
Slide 12: Medicaid Application Activity & Woodwork Effect
Medicaid Application Activity & Woodwork Effect Surge in Medicaid applications reported Plagued by processing delays & backlogs Difference between ‘deemed’ eligible & actually enrolled Transition time from federal exchange to the state programs unknown Trust remains an issue
Slide 13: Molina Awarded Contract for Duals in Los Angeles County
Molina Awarded Contract for Duals in Los Angeles County Selected to participate as direct contractor Largest duals demo in the country (State caps demo at 200K) Leverages existing ABD and Medicare SNP provider network Complements other duals service areas in the State: Riverside, San Bernardino, San
Slide 14: Molina Medicare-Medicaid Plan (MMP) Implementations
State Estimated Lives in Molina Markets Voluntary Enrollment Passive Enrollment 1 2 2 Molina Medicare-Medicaid Plan (MMP) Implementations California (Riverside, San Bernardino & San Diego counties) 122K 4/1/14 5/1/14 California (Los Angeles county) 200K TBD 7/1/14 Illinois 18K 3/1/14 6/1/14 Michigan
Slide 15: Long Term Care and potential enrollees
nf $ $ $ $ $ Long Term Care $ PET Dual Eligible SoS $55 $ OL oe a TRL Assistanceto Needy Families A Number of potential enrollees oon MOLINA ry) | HEALTHCARE
Slide 16: Duals – Model of Care
Duals – Model of Care Integrated LTSS/Acute And Rx Care Transition Programs Measuring Improvements Individualized Care Plans Medication Reviews and Medication Therapy Mgmt Interdisciplinary Care Teams Health Risk Assessments Care Management Dual Eligibles Most Common Diagnoses Inpatient Services: Af
Slide 17: Mitigating Our Risk with the Dual Eligible
Mitigating Our Risk with the Dual Eligible Duals may have chronic conditions and higher costs over time Risk adjusters Rate corridors Settlement agreement (CA) Savings assumptions
Slide 18: Mitigating our Duals Risk – Savings Assumptions
Mitigating our Duals Risk – Savings Assumptions CMS Rate Setting Process Guidance Sample Aggregate Savings Targets Under the Demonstrations 1. CMS Joint Rate Setting Process Under the Capitated Financial Alignment Initiative. 2. Memorandums of Understanding (MOU) between CMS and the State of Califor
Slide 19: Marketplace
Marketplace Spanish language sites later start 8 out of 10 low-income Americans still don’t understand the program Molina pricing assumed higher medical costs and utilization Enrolled individuals at Molina health plans are primarily the uninsured and previous Medicaid recipients that had lost their
Slide 20: New Medications & Treatments
New Medications & Treatments Coverage of the cost of new Hepatitis C treatment drug should be carved out until sufficient actuarial claims data is available Medicaid managed care rates must factor in claims for the new treatment (actuarial soundness) Pricing is extraordinarily cost prohibitive Incid
Slide 21: Mission Priorities
Mission Priorities Manage our growth • Organic growth • Medicaid expansion • Dual eligible population • RFPs Leverage our business portfolio • Health plan business • MMS • Direct delivery Strive for operational excellence • Quality care • STAR ratings Strategic Priorities Our mission is to provide q
Slide 22: Molina Healthcare
MOLINA. HEALTHCARE
Slide 23: Medical Margin: Results & Initiatives
Medical Margin: Results & Initiatives Terry Bayer Chief Operating Officer February 13, 2014 New York, New York
Slide 24: Historical Medical Margin
Historical Medical Margin Molina Medical Margin Q1 2009-Q4 2013
Slide 25: Key Impact Areas
Key Impact Areas Activities focused on improving Medical Margins Health Care Services (Model of Care) Focus on Quality Member Retention
Slide 26: Key Impact Area - Molina Care Model
Key Impact Area - Molina Care Model The Model of Care confirms/reestablishes the member’s connection to their Medical Home. Ensures appropriate use of services and facilities. High touch Focus on care transitions Prevention of hospital admissions/readmissions Appropriate ER utilization
Slide 27: Model of Care – Historical vs. Current
Historical Model: Insurance driven by acute, episodic care Current Model: Member centric management & care delivery Model of Care – Historical vs. Current Reactive Silos Discharge planning Telephonic management Pharmacy on formulary Proactive Integrated team Care transitions Face-to-face interaction
Slide 28: Community Connector Case Study – Washington
Community Connector Case Study – Washington 67-year-old woman with multiple personalities, depression, anxiety, a history of suicidal ideations, hypothyroidism, asthma, hypertension, congestive heart failure and osteoarthritis. Image for illustrative purposes only. Not actual patients.
Slide 29: Community Connector Case Study – South Carolina
Community Connector Case Study – South Carolina Single father reached out for assistance for behavior modification for his teenage daughter who is a Molina member. Was not interested in mental health services. Image for illustrative purposes only. Not actual patients.
Slide 30: Community Connector Case Study - Washington
Community Connector Case Study - Washington 74-year-old member has COPD, hypertension, diabetes, and muscular degeneration. He is also an alcoholic, has poor nutritional habits, and no family to support him. Image for illustrative purposes only. Not actual patients.
Slide 31: Monitoring and Care Management: California
Monitoring and Care Management: California Reduction in manageable inpatient utilization in a previously unmanaged new population Admits/K reduction of 7% 1. Molina Internal Analytics. Molina Healthcare of California Admits/K
Slide 32: Patient Centered Medical Home (PCMH) Impact: New Mexico
Patient Centered Medical Home (PCMH) Impact: New Mexico PCMH Readmits/K 63% less than Non PCMH Readmission rates lower among PCMH members vs. Non PCMH members 1. Journal of Community Health. “Community Health Workers and Medicaid Managed Care in New Mexico”, June, 2012.
Slide 33: Categories & Measurements Contributing to Medicare STAR Ratings
Categories & Measurements Contributing to Medicare STAR Ratings Quality improves margin by increasing pay for performance revenue & removing barriers to care Data to support STAR ratings come from surveys, claims data, and medical records CAHPS = Consumer Assessment of Healthcare Providers and Syste
Slide 34: Star Ratings Data Timeframes
2015 Ratings In Use Measurement & Publication Care Delivered 2016 Ratings In Use Measurement & Publication Care Delivered Care Delivered Measurement & Publication 2014 Ratings In Use Star Ratings Data Timeframes
Slide 35: Key Impact Area – Focus on Quality
Key Impact Area – Focus on Quality Align incentives to improve quality results Provider incentive programs Member HEDIS incentive programs Align provider payments to quality metrics
Slide 36: Key Impact Area - Retention Model
Key Impact Area - Retention Model Ensuring that members stay with us as we grow, and that we are meeting their healthcare needs Welcome calls 30, 60, and 90 day touch point calls Personal Care Assistant (PCA) Escalation team
Slide 37: Molina Healthcare
MOLINA. HEALTHCARE
Slide 38: Changing Medical Cost Profile
Changing Medical Cost Profile Joseph White Chief Accounting Officer February 13, 2014 New York, New York
Slide 39: Revenue by Product
49 % TANF 40 % ABD 9% 77 % TANF 18 % ABD TANF ¹ 52 % 33 % ABD 7% 7% Revenue by Product 2008A 2013A 2014G Revenue shift to chronic care is changing our medical cost profile Medicare CHIP 2% Medicare 3% CHIP 2% Please refer to the Company’s cautionary statements. Medicare Duals CHIP 1% 1. For 2014, TA
Slide 40: Revenue Shift to Chronic Care is Changing our Medical Cost Profile
Revenue Shift to Chronic Care is Changing our Medical Cost Profile PMPM Molina Healthcare of Ohio Medical cost PMPM by type of member LTC = Long Term Care BH = Behavioral Health Rx = Pharmacy OP = Outpatient IP = Inpatient Please refer to the Company’s cautionary statements.
Slide 41: Revenue Shift to Chronic Care: % of Revenue
% of Revenue Molina Healthcare of Ohio Medical Spend % by Type of Member LTC = Long Term Care BH = Behavioral Health Rx = Pharmacy OP = Outpatient IP = Inpatient Please refer to the Company’s cautionary statements. Revenue Shift to Chronic Care is Changing our Medical Cost Profile
Slide 42: Changing Medical Cost Profile
Greater significance of risk adjustment Payment linked to health status and demographic characteristics of the member Document medical conditions Process must lead to improved outcomes Greater importance of medically related administrative cost Care coordination Community connectors New contracts an
Slide 43: Risk Adjusted Revenue is Growing
Risk Adjusted Revenue is Growing 1. MMP = Medicare-Medicaid Plan (Duals). Please refer to the Company’s cautionary statements.
Slide 44: TANF & ABD vs. Integrated Dual Administrative Costs
TANF & ABD Integrated Dual Administrative Costs % of Population to be care managed 1% 100% $12 Administrative costs to support Integrated Duals members are nearly seven times higher than a typical TANF or ABD member Percentage of population requiring care management 2014E Administrative Costs Source
Slide 45: Molina Healthcare
MOLINA. HEALTHCARE
Slide 46: 2014 Guidance
2014 Guidance John Molina Chief Financial Officer February 13, 2014 New York, New York
Slide 47: Cautionary Statement
Cautionary Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 : This Guidance presentation and our accompanying oral remarks contain numerous “forward-looking statements” regarding: expected financial results; and various other matters. All of our forward-look
Slide 48: The Opaque Crystal Ball
The Opaque Crystal Ball Please refer to the Company’s cautionary statements.
Slide 49: Themes
Themes Build Transition Consolidation Pursuing new business Designing & implementing programs and systems Documenting readiness Incurring cost before 2014 revenue Upcoming: o SC & IL o MMP Duals o Marketplace o Medicaid expansion o NM & FL Re-procurement o WI Medicare Transitioning members into mode
Slide 50: 2014 Guidance
Revenue Premium Revenue ACA Fee Reimbursement Premium Tax Revenue Service Revenue Investment and Other Revenue Total Revenue Total Medical Care Costs Medical Care Ratio Total Service Costs General & Administrative Expenses G&A Ratio Premium Taxes ACA Insurer Fee Depreciation & Amortization Interest
Slide 51: New Product Membership Included in 2014 Guidance (Jan–Mar)
January 2014 March 2014 New Product Membership Included in 2014 Guidance State Various CA, NM, & WA NM SC WI OH IL Program Type Marketplace Medicaid Expansion LTC Medicaid SNP Medicaid Expansion MMP Duals Eligible 2M 1.4M 44K 740K 28K 275K 18K Enrollees 15K 160K 5K 125K 1K 30K 5K Revenue PMPM $300 $
Slide 52: New Product Membership Included in 2014 Guidance (Apr–Oct)
April 2014 May 2014 June 2014 July 2014 October 2014 New Product Membership Included in 2014 Guidance State MI CA OH FL SC IL MI Program Type Medicaid Expansion MMP Dual MMP Duals (Medicare Voluntary) Medicaid (Re- procurement) MMP Duals Medicaid Expansion MMP Duals Eligible 500K 322K 48K 1.2M 54K 3
Slide 53: Status of Reimbursement – ACA Fee in Molina States
Comments ACA Fee Gross Up Reimbursemen t Revenue Reimbursement Not Yet Achieved Status of Reimbursement – ACA Fee in Molina States Our guidance assumes the ACA fee and related tax effects will be fully reimbursed in all states. Ohio Actuarial rate memorandum (Mercer) calls for reimbursement of fee -
Slide 54: Base Business Net Rate Changes Included in 2014 Guidance
State FINAL Effective Date Rate Change Base Business Net Rate Changes Included in 2014 Guidance California Oct-13 +2.5% ¹ Florida Sep-13 +1.0% ² Illinois Jan-14 (-3.0%) ¹ Michigan Oct-13 +1.0% ¹ New Mexico Jan-14 0.0% 1,2 Ohio Jan-14 2.0% 1,3 South Carolina Jan-14 New Rates Texas Apr-14 0.0% ² Utah
Slide 55: DHCS Agreement - Settlement Account
Target Profitability margin is less than 3.25% for any year Target Profitability margin exceeds 3.25% for any year DHCS Agreement - Settlement Account 50% (75% for 2014 only) of difference between actual and target profitability margins multiplied by the applicable premium revenue is payable to Moli
Slide 56: Guidance Assumes G&A Leverage
Guidance Assumes G&A Leverage Our FY 2014 mid-point guidance assumes G&A expenses of $770M or 8% of total revenues. Approximately $110M or 1% of our total revenues is required to support growth. G&A Expense 2014 Growth Current Business Note(s): 1. G&A ratio computed as a percentage of premium revenu
Slide 57: Headwinds into 1Q2014
Net ($0.92) Headwinds into 1Q2014 Continued administrative spend ahead of revenue G&A expenses incurred in anticipation of related revenues will reduce first quarter GAAP & Adjusted EPS by (~$0.38) Possible delay in revenue recognition Delayed recognition of ACA fee reimbursement may reduce first qu
Slide 58: Molina Healthcare
MOLINA. HEALTHCARE
Slide 59: Reconciling Adjusted EPS Ranges
Reconciling Adjusted EPS Ranges Please refer to the Company’s cautionary statements. Note(s): Low End High End Adjusted net income per diluted share, continuing operations $4.00 $4.50 Less non-cash adjustments, net of tax: Depreciation, and amortization of capitalized software $1.29 $1.29 Stock base