Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (January 2012)
70 slides from Molina Healthcare's investor day presentation, Jan 26, 2012
Slide 1: Investor Day
Exhibit 99.2 Investor Day 2012A January 26, 2012 New York, New York
Slide 2: Agenda
Time Topic Speaker Agenda 12:30pm-12:35pm Opening Remarks Juan José Orellana, VP Investor Relations 12:35pm-1:10pm Business Overview J. Mario Molina, MD, Chief Executive Officer 1:10pm-1:30pm Q&A 1:30pm-1:40pm Break 1:40pm-2:15pm Operations Update Terry Bayer, Chief Operating Officer 2:15pm-2:40pm C
Slide 3: Cautionary Statement
Cautionary Statement regarding the Company’s expected results for fiscal year 2012. All of our forward-looking statements are based on our current expectations and assumptions. Actual results could differ materially due to the unexpected failure of our assumptions or due to adverse developments rela
Slide 4: Business Overview
Business Overview J. Mario Molina, MD President & Chief Executive Officer January 26, 2012 New York, New York
Slide 5: Solid progress on long-term value creation
Solid progress on long-term value creation Goal setting and results Executed on our plans for 2011 Health plan business remains stable Medicare SNP business continues to grow Improved profitability despite rate environment First CMS certification achieved for fiscal agent contract Positioned for str
Slide 6: Business snapshot
Business snapshot Markets and members served – 3Q 2011 1. Virginia clinics provide Direct Delivery. 2. Florida has a managed care program as well as a Pharmacy Rebate Program. 3. Fee based fiscal agent business.
Slide 7: Delivering enrollment growth by market
Delivering enrollment growth by market As our enrollment grows, Molina remains committed to delivering quality health care. Except for Wisconsin, all of our eligible health plans have earned NCQA accreditation. Enrollment (3Q 2007 – 3Q 2011) Molina health plans ranked in Consumer Reports Magazine, N
Slide 8: Executing on our plan
Executing on our plan YTD 3Q 2010 vs. YTD 3Q 2011
Slide 9: Molina earnings per share
Molina earnings per share Split adjusted
Slide 10: Positioned for growth
Positioned for growth Building on momentum from new business wins and retention of existing contracts Leveraging established SNP (duals) growth platform Investing in Company-owned direct delivery footprint Continue developing and up-selling our fiscal agent offering Investing in corporate infrastruc
Slide 11: U.S. Medicaid Spending and Enrollment
U.S. Medicaid Spending and Enrollment Percent Changes, FY 1998 – FY 2012E Source: Medicaid Enrollment June Data Snapshot, KCMU, February 2011. Spending Data from KCMU Analysis of CMS Form Data for Historic Medicaid Growth Rates. FY and FY data based on KCMU survey of Medicaid officials in states and
Slide 12: Key challenges for 2012
Key challenges for 2012 Sources: 1. “States Continue to Feel Recession’s Impact.” Center on Budget and Policy Priorities, June 17, 2011. 2. KMCU survey of Medicaid officials in states and DC conducted by Health Management Associates, September 2009, September 2010, and September 2011. Although some
Slide 13: Short term growth opportunities
Short term growth opportunities Economic, healthcare, and technology trends will translate into revenue opportunities in the short run.
Slide 14: Unprecedented new focus on dual eligibles
Unprecedented new focus on dual eligibles Recognition that dual eligibles are the most costly group of beneficiaries for both Medicaid and Medicare Dual eligibles account for approximately 15% of Medicaid enrollees but contribute to 39% of all Medicaid spending ² Medicaid/Medicare spending averages
Slide 15: Our Medicare business is growing
Our Medicare business is growing Source: Company Data and CMS Special Needs Plan Data https://www.cms.gov/MCRAdvPartDEnrolData/SNP/list.asp#TopOfPage
Slide 16: Top SNP Dual Eligible Plans Nationwide
Top 10 SNP Dual Eligible Plans Nationwide* Molina has well established SNPs serving the financially vulnerable Molina’s dual eligible enrollment Source: CMS Health Plan Management System as of 12/2011. Information sourced quarterly. Rank Plan Membership 203k 75k 75k 68k 53k 42k 28k 27k 18k 16k 1. Un
Slide 17: Molina already serves nearly 7,000 SNP beneficiaries in Michigan
Molina already serves nearly 7,000 SNP beneficiaries in Michigan Opportunities in perspective 1. The Advocate, “Contract Winners want to protect data.” August 2, 2. Insider Louisville, Multiple mega firms pursue Kentucky’s $4 billion Medicaid contract .” June 23, 3. Pacific Business News, $1.65B in
Slide 18: Supporting integrated care for duals
Supporting integrated care for duals Medicare and Medicaid are each governed by their own policies and procedures, Dual eligibles are forced to navigate a system with two sets of providers, benefits, and even enrollment cards. This fragmentation can result in unnecessary, duplicative, or missed serv
Slide 19: Cost of uncoordinated care
Cost of uncoordinated care Medicaid patients with extremely uncoordinated care account for a disproportionate share of costs. These patterns are even more significant among dual patients who experience a greater prevalence of chronic diseases and co-morbid conditions.
Slide 20: Direct Delivery
Our approach to direct delivery is flexible and can accommodate changes in local market requirements and needs. We currently operate 21 clinics and plan to continue expanding. Direct Delivery
Slide 21: Why build clinics at all?
Why build clinics at all? Augment network in areas of provider scarcity Supplement provider capacity issues Greater emphasis on quality and outcomes States continue to cut rates Nurtures patient loyalty to the health plan Brand awareness & community engagement
Slide 22: Why not build more clinics?
Why not build more clinics? Need to augment the network not replace the network Can be perceived as competing directly with network providers Identifying right locations can be a challenge Hiring doctors to serve Medicaid patients is not easy Get it right from the beginning
Slide 23: Direct Delivery: expanding our footprint
Direct Delivery: expanding our footprint Current Molina clinics Future Molina clinics 15 new clinics planned for 2012
Slide 24: Direct Delivery – Rx solutions
Direct Delivery – Rx solutions A 2007 U.S. survey reported that nearly 31% of those polled had not filled a prescription they were given by their physician. ¹ 1. Source: Enhancing Prescription Medicine Adherence: A National Action Plan, National Council on Patient Information and Education August 20
Slide 25: Direct Delivery – transportation solution
Direct Delivery – transportation solution Transportation solution Free shuttle service offers a ride between various key community access points, including our clinics. (Long Beach, Inland Empire.) Transportation to and from a physician’s office remains a key problem for Medicaid beneficiaries. The
Slide 26: Direct Delivery – our facilities
Direct Delivery – our facilities Typically leased facilities about 4,000 sq/ft 4-5 employees 1-2 Primary Care Physicians per office Contracted: Lab, X-Ray, and Specialty services pre build-out after build-out
Slide 27: Preparation for anticipated growth
Preparation for anticipated growth Rent vs. own decision (MOH already occupied 40% of complex) Advantageous real estate market conditions Molina acquires office complex in Long Beach, California. Purchase price of $81 million Two connected 14-story towers 461,263 square feet Class A building
Slide 28: Summary of investor areas of interest
Summary of investor areas of interest
Slide 29: Q&A
Q&A
Slide 30: Operations Update
Operations Update Terry Bayer Chief Operating Officer January 26, 2012 New York, New York
Slide 31: @BRMOLINA
= 4 @BRMOLINA
Slide 32: Florida
Florida Improved financial performance due to: Reduced unit costs Utilization improvement Premium rate increase effective 9/1/11 Molina Healthcare of Florida Historical and YTD Enrollment 2009-3Q2011 Molina Healthcare of Florida Historical and YTD MCR 2009-3Q2011
Slide 33: Texas overview
Texas overview Existing Molina footprint Molina new SDAs effective 3/1/2012 In addition to Molina’s already expansive footprint in Texas, effective March 1, 2012, Molina will have three new service delivery areas (SDAs). Source: Texas Health and Human Services Commission Molina New SDAs (effective 3
Slide 34: MOLINA
MOLINA SRT TTRCAHE:
Slide 35: Ohio RFA
Ohio RFA $5.1 billion rebid Implementation expected January 1, 2013 1.5M covered families and children (CFC) lives, 125K ABD lives, and 37K children with disabilities Mandates ABDs, including children, into managed care Beneficiaries currently enrolled in the covered families and children (CFC) prog
Slide 36: Ohio RFA
Post-2012 RFA Ohio Managed Care Regions (3 regions) Pre-2012 RFA Ohio Managed Care Regions (8 regions) Ohio RFA Source: Ohio Department of Job and Family Services (http://jfs.ohio.gov/rfp/JFSR1213078019/JFSR1213078019.stm) Pre-2012 RFA Current Molina Service Area (4 regions)
Slide 37: Slide 37
Slide 38: Michigan duals
Michigan duals State began enrolling dual eligibles in Medicaid (12/11) Dual eligibles in SNP automatically enrolled with opt- out Michigan Department of Community Health (MDCH) developing Dual Eligible Integrated Care Plan CMS submission target (4/1) Implementation target (1/2013)
Slide 39: California Budget
California Budget Proposed changes to Medi-Cal (Medicaid) Phased-in transfer of duals to managed care starting in January 2013. Medi-Cal benefits transition in first year; Medicare benefits over three years. (approx. $670M projected savings in SFY 2013) Statewide expansion of Medi-Cal managed care s
Slide 40: Carve-in trends
Carve-in trends Ohio Rx: 10/11 Texas Rx: 3/12 Texas inpatient: 3/12
Slide 41: Maine MMIS certification
Maine MMIS certification Certification allows state to receive maximum federal funding for Maine Integrated Health Management Solution (MIHMS) by meeting federal standards for claims management system. State of Maine can claim 75% federal reimbursement for ongoing operations retroactive to September
Slide 42: Molina Medicaid Solutions upsells
Item Narrative When Sold (Qtr/Yr) Item Narrative When Sold (Qtr/Yr) Molina Medicaid Solutions upsells Provider Incentive Payments Incentive payments made to the medical community 3Q 2011 Provider Enrollment Application Enhancement of provider portal application 3Q 2011 HIPAA standards for installati
Slide 43: Q&A
Q&A
Slide 44: Capital Adequacy
Capital Adequacy Joseph White Chief Accounting Officer January 26, 2012 New York, New York
Slide 45: Molina earnings have funded past growth
Molina earnings have funded past growth Sources of Capital 2006 through 3Q2011 Common Equity Convertible Debt Net Income Total Revenue 2006-2010 Source(s): SEC Filings Please refer to the Company’s cautionary statements.
Slide 46: Molina has invested to grow its business
Molina has invested to grow its business Capital Deployment 2006 through 3Q2011 Cash Paid for Acquisitions Contributions to Subsidiaries Capital Expenditures Share Repurchases Source(s): SEC Filings and Company Data Please refer to the Company’s cautionary statements.
Slide 47: Capital deployment: acquisitions
Entered Michigan by acquiring Minority Interest Acquired controlling interest in Michigan Plan Entered New Mexico by acquiring Health Care Horizons the parent company of Cimarron Health Plan Acquired the rights to serve Wellness Plan members in Michigan Entered Washington by acquiring Qualmed Washin
Slide 48: Molina health plans are well capitalized
Molina health plans are well capitalized *E denotes estimate. Source(s): Company Estimates Regulatory Capital 2011E* Please refer to the Company’s cautionary statements.
Slide 49: Molina health plans have capital to support growth
Molina health plans have capital to support growth Health Plan Growth Potential without New Capital 2011E* *E denots estimate. Source(s): Company Estimates Please refer to the Company’s cautionary statements.
Slide 50: Start-up operations need capital
Start-up operations need capital Regulatory capital Systems development and configuration Start up costs/initial operating losses Direct Delivery set up Molina Medicaid Solutions development costs Please refer to the Company’s cautionary statements.
Slide 51: Health plans need regulatory capital of approximately 7% of premium revenue
On average our health plans need regulatory capital of approximately 7% of premium revenue. Required regulatory capital as % of revenue Required Equity as % of Premium Revenue 2006-2011E* *E denotes estimate. Source(s): Company Data Please refer to the Company’s cautionary statements.
Slide 52: Startup costs and initial operating losses
Startup costs and initial operating losses Molina Healthcare of Ohio Operating Income or (Loss) 2005-3Q 2011 YTD Source(s): NAIC Statutory Filings “It takes time and money to build a profitable health plan.” Joseph White May 29, 2008 Molina Healthcare Investor Day, NY Please refer to the Company’s c
Slide 53: Other costs to start a health plan
Other costs to start a health plan Systems Development and Configuration Approximately $2M for HMO system development and configuration Direct Delivery set-up On average build out cost for a typical clinic is $750K Please refer to the Company’s cautionary statements.
Slide 54: Pure Play LT Debt to Equity Ratio
Pure Play LT Debt to Equity Ratio Last Twelve Months as of Sept. 30, 2011 (1),(2) Note: (1) MOH Long Term Debt includes $48.6M term loan issued December 7, to finance the Molina Center acquisition. (2) AGP Long Term Debt includes $400M Senior Notes issued November 16, and $75M Senior Notes issued Ja
Slide 55: Q&A
Q&A
Slide 56: Financial Outlook 2012
Financial Outlook 2012 John Molina Chief Financial Officer January 26, 2012 New York, New York
Slide 57: Cautionary Statement
Cautionary Statement regarding the Company’s expected results for fiscal year 2012. All of our forward-looking statements are based on our current expectations and assumptions. Actual results could differ materially due to the unexpected failure of our assumptions or due to adverse developments rela
Slide 58: 2012 EPS outlook
2012 EPS outlook Please refer to the Company’s cautionary statements.
Slide 59: $1.80 Guidance Issued January 26, 2012
$1.80 Guidance Issued January 26, 2012 2012 EPS outlook Re-procurements in WA & MO Benefit carve-ins in TX and OH TX inpatient and pharmacy Ohio full year of pharmacy Change in mix: CA SPDs, TX STAR+PLUS & WA ABDs TX expansion commencing March 2012 Continuing rate pressure Infrastructure build for 2
Slide 60: 2012 guidance
Note: “G” denote guidance. Amounts are estimates and subject to change. Actual results may differ materially. See cautionary statement. 2012G* Premium Revenue Service Revenue Investment Income Total Revenue Medical Care Costs Medical Care Ratio Service Costs Service Revenue Ratio G&A Expense G&A Rat
Slide 61: 2012 MOH segment guidance
MMS Total 2012 MOH segment guidance Health Plans Premium Revenue Service Revenue Investment Income Total Revenue Medical Care Costs Medical Care Ratio Service Costs Service Revenue Ratio G&A Expense G&A Ratio Premium Tax Expense Depreciation Amortization Interest Expense Income Before Tax Net Income
Slide 62: Rate change update
2011 CARRYOVER 2012 Health Plan Effective Date Revenue Change Effective Date Revenue Change Rate change update California 7/1/2011 ( 3.5%) 1/1/2012 0.5% (1) 10/1/2011 ( 0.5%) 10/1/2012 no change (2) Florida 9/1/2011 ˜ 7.5% 9/1/2012 no change (2) Michigan 10/1/2011 ˜ 1.0% 10/1/2012 no change (2) Miss
Slide 63: 2012 Guidance: Texas expansion
2012 Guidance Texas expansion Effective Date MOH Expected Membership Prior to Expansion ¹ 155K MOH Expected Additional Membership 170K Total Expected MOH Membership ² 325K MOH Expected Market Penetration ² 10% MOH Expected Incremental Revenue $900M 1. Denotes estimated membership at 2/29/12. 2. Deno
Slide 64: Texas March 2012 – estimated impact of re-procurement
Line of Business Dec 2011 Members Dec 2011 Rates Mar 2012 Members Mar 2012 Rates Texas March 2012 – estimated impact of re-procurement TOTAL STAR 18,000 $220 123,000 $235 TOTAL CHIP 73,000 $85 80,000 $130 TOTAL STAR PLUS 64,000 $440 100,000 $780 TOTAL 155,000 $250 303,000 $390 *Guidance assumes MCR
Slide 65: Washington July 2012 – estimated impact of re-procurement
Line of Business June 2012 Members June 2012 Rates July 2012 Members July 2012 Rates TANF 327,000 $160 288,000 $150 ABD 5,000 $850 12,000 $865 CHIP 11,000 $100 9,000 $95 State Funded - BHP 8,000 $225 6,000 $240 TOTAL 351,000 $170 315,000 $180 Premium revenue excluding Medicare, is expected to drop a
Slide 66: What could affect our 2012 number? Headwinds
What could affect our 2012 number? Potential headwinds: Premium rate decreases greater than projected Texas cost and utilization issues Greater loss of enrollment than projected in WA Higher than projected ABD utilization in WA MO RFP outcome Revenue and cost pressures in Idaho and Maine Please refe
Slide 67: What could affect our 2012 number? Tailwinds
What could affect our 2012 number? Potential tailwinds: Rate increases in markets where we are expecting none Cost and utilization improvement Texas Higher than projected enrollment in CA (ABD), TX and WA Please refer to the Company’s cautionary statements.
Slide 68: Where is 2013 guidance?
Where is 2013 guidance? Moving parts for 2013 2012 Supreme Court Decision on individual mandate and Medicaid expansion 2012 Presidential election Ohio RFP (goes into effect 1/2013) Dual eligible enrollment CA opportunity: 1.1M MI opportunity: 234K WA opportunity: 142K Florida expansion Georgia RFP S
Slide 69: Investment highlights
Investment highlights Attractive sector growth prospects driven by government policies and economic conditions Proven flexible health care services portfolio (risk- based, fee-based and direct delivery) Diversified geographic exposure with significant presence in high growth regions Focus on governm
Slide 70: Q&A
Q&A