Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (September 2012)
61 slides from Molina Healthcare's investor day presentation, Sep 19, 2012
Slide 1: Investor Day 2012
Exhibit 99.1 Investor Day 2012B September 19, 2012 New York, New York
Slide 2: Cautionary Statement
Cautionary Statement 2 SafeHarborStatementunderthe PrivateSecuritiesLitigationReformActof 1995: This slide presentation and our accompanying oral remarks contain numerous “forward looking statements”regarding our cost control initiatives in Texas and Wisconsin; our expansion into the dual eligible m
Slide 3: Agenda
Agenda 3 Approx. Time Topic Speaker 12:30pm-12:35pm Opening Remarks Juan José Orellana, VP Investor Relations 12:35pm-1:10pm Operations Review Terry Bayer, Chief Operating Officer 1:10pm-1:45pm Business Overview Dr. J. Mario Molina, Chief Executive Officer 1:45pm-2:00pm Q&A 2:00pm-2:15pm Break 2:15p
Slide 4: Operations Review
Operations Review Terry Bayer Chief Operations Officer September 19, 2012 New York, New York
Slide 5: Revenue Contribution by State
Revenue Contribution by State 5 Please refer to the Company’s cautionary statements. 1H 2012 Wisconsin 1% California 12% PDR taken 2Q 2012 Dual eligible contract in 4 Washington 15% counties effective 2013 Began serving ABD population 7/1/2012 Florida 4% Submitted Long-Term Care contract RFP Utah 5%
Slide 6: Texas
Texas 6 Effective March 1, 2012, Molina added three new service delivery areas (SDAs). Molina New SDAs (effective 3/1/2012) El Paso Service Area STAR & STAR+PLUS El Paso and Hudspeth Counties Texas Health Plan Enrollment 301K Jefferson Service Area CHIP 155K Chambers, Hardin, Jasper, Jefferson, 94K
Slide 7: Texas Overview
Texas Overview 7 Remediation activities Blended rate increase of 4% effective 9/1 Provider contract changes Re-contracted at lower unit costs Implementation of state required fee schedules New President & Management Team st Enrollment at September 1 was 291,000; ABD declined 8.1% from June 30th (8.1
Slide 8: Wisconsin
Wisconsin 8 Premium rates low in relation to benefits 1 UnitedHealthcareexitregions Remediation activities Terminated certain high-cost providers Utilization Management New leadership 1. Milwaukee Wisconsin Journal Sentinel, “UnitedHealthcare ends BadgerCare Plus contract with state” August 19, 2012
Slide 9: Earnings Margin 2006-1H2012
Earnings Margin 2006-1H2012 9 Please refer to the Company’s cautionary statements. EBITDA MARGIN AFTER TAX MARGIN Excluding Missouri Excluding TX & OH write-down Missouri Excluding Startup write-down Excluding Texas and TX & OH Missouri Texas and Startup Missouri H1N1 Flu H1N1 Flu 4.6% 4.9% 5.1%4.6%
Slide 10: California's Coordinated Care Initiative (CCI)
California’s Coordinated Care Initiative (CCI) 10 Health plans must have an existing Medicaid contract The CCI will impact Molina Healthcare of California as follows: 1. Mandatory managed care enrollment of dual eligibles for the Medicaidportion of the benefit Three Party Agreement between 2. Passiv
Slide 11: California's Coordinated Care Initiative (CCI)
California’s Coordinated Care Initiative (CCI) 11 Health Plan Readiness Membership Rates Benefits Network Eligible populations Two payments for dual All Medicare Parts A, B, Leverage current defined for duals members with Medicare and D Medicaid and Medicare enrollment and and Medicaid portions All
Slide 12: Utilization Decreases With Length of Enrollment
Utilization Decreases With Length of Enrollment 12 Please refer to the Company’s cautionary statements. As length of enrollment increases for our ABD populations, utilization decreases. Admits per K Days per K (manageable) (manageable) by enrollment month by enrollment month 289 1,239 276 1,238 252
Slide 13: Ohio (TANF & ABD)
Ohio (TANF & ABD) 13 Effective June 1, 2013 Molina Healthcare will expand into counties. 38 new Pre-2012 RFA Post-2012 RFA Current Molina Service Area Ohio Managed Care Regions 1.6M Eligibles Columbus Columbus Dayton Dayton Cincinnati Cincinnati Current Molina service area New Molina service area So
Slide 14: Molina Selected To Serve Duals in Max Regions Allowed
Molina Selected To Serve Duals in Max Regions Allowed 14 The state of Ohio chose Molina to participate in the 3-year demonstration program in the Southwest, West Central, and Central regions. Implementation expected to begin June 1, 2013. Current Molina Service Area Molina Integrated Care 260,000 me
Slide 15: Washington
Washington 15 On September 1, enrollment was 410,000, including 19,000 ABD members Established provider relationships No Long Term Care benefits for new Aged, Blind, or Disabled (ABD) members Molina was only health plan in Washington participating in the Washington Medicaid Integration Program (WMIP
Slide 16: New Opportunities in Florida Long-Term Care Program
New Opportunities in Florida Long – Term Care Program 16 The program involves nursing home, hospice, and home and community-based services in 11 regions. 1 The State of Florida is expected to select 2-5 plans per region. Molina has bid in 8 of 11 regions (30 counties) with 90,000 beneficiaries to be
Slide 17: New Opportunities in New Mexico Centennial Care
New Opportunities in New Mexico Centennial – Care 17 Overview: Integrates medical, behavioral health, and long term care services 680,000 beneficiaries Plans must be statewide Special Needs Plan (SNP) or Medicare Advantage plan Reduces 7 MCOs to 5 Managed Care Organizations will provide medical, beh
Slide 18: MMS Comes of Age
MMS Comes of Age 18 Please refer to the Company’s cautionary statements. The year over year improvement due to CMS certifications in Idaho and Maine. MMS Operating Income by Quarter $10M $8.4M $8M $6.1M $6.6M $6M Diversifying profit stream Generating cash flow $4M Serving 2.5M beneficiaries $2M $1.7
Slide 19: Business Overview
Business Overview J. Mario Molina, MD Chief Executive Officer September 19, 2012 New York, New York
Slide 20: Business Snapshot
Business Snapshot 20 Markets and members served 2Q–2012 Health plan enrollment growth (in thousands) 1,853 Washington 1,697 1,613 356,000 1,455 (2 clinics) Maine 1,256 Michigan Idaho 220,000 Wisconsin 42,000 New Utah Ohio Jersey '08 '09 '10 '11 2Q 2012 86,000 260,000 1 Virginia Health plan membershi
Slide 21: Revenue Contribution by State
Revenue Contribution by State 21 Please refer to the Company’s cautionary statements. 1H 2012 Wisconsin 1% California 12% PDR taken 2Q 2012 Dual eligible contract in 4 Washington 15% counties effective 2013 Began serving ABD population 7/1/2012 Florida 4% Submitted Long-Term Care contract RFP Utah 5
Slide 22: Market Dynamics
Market Dynamics 22 State Budget Unemployment ACA 2012 Elections State Budget Shortfalls Unemployment Supreme Court Decision2012 Elections Nationwide through July 2012 Budget shortfalls in billions -$55* -$110 -$107 -$130 -$191 Makes Medicaid expansion optional for states Remaining budget gaps after
Slide 23: A History of Adapting to Constant Change
A History of Adapting to Constant Change 23 Molina Healthcare, Founded 1980 2010 Acquiredthe Health Information Management business from Unisys, now 2003 Molina Medicaid Solutions Completed 1997 successful Initial 1980 Established Utah Public Offering Opened 3 Primary operation, the first Care Clini
Slide 24: Long-Term Incremental Growth Drivers
Long-Term Incremental Growth Drivers 24 Please refer to the Company’s cautionary statements. Estimated additional revenue by 2015 as a result of duals and Medicaid 4expansion Estimated 2015 run rate ~$2B ~$12B CA: $0.3B OH: $0.5B WA: $0.3B ~$4B Other: $1.0B 3 CA: $1.2B MI: $0.9B OH: $0.5B ~$6B TX: $
Slide 25: U.S. Medicaid Coverage Estimates Updated for the Supreme Court Decision
U.S. Medicaid Coverage Estimates Updated for the Supreme Court Decision 25 Estimated Changes in Insurance Coverage by 2022* March 2012 Baseline July 2012 Estimate Incorporating SCOTUS Decision Nongroup Employer1 Uninsured & Other2 Medicaid Exchanges & CHIP * Source: CongressionalBudgetOffice, “Estim
Slide 26: Two Ends of the Continuum
Two Ends of the Continuum 26 TANF Duals Breaks in eligibility More continuous eligibility Episodic care Demographics 1 Chronic illnesses Pregnancy Behavioral health Greater ethnic diversity Over Age More likely to have greater Larger support system at 65 Over Age 65 limitations in activities of clin
Slide 27: Most Common Diagnoses
Most Common Diagnoses 27 TANF Diagnoses ABD Diagnoses Dual Eligibles Diagnoses Inpatient Services Delivery Affective psychoses Affective psychoses Complications of delivery Septicemia Septicemia Other maternal complications Schizophrenic disorders Care involving use of rehabilitation procedures Prol
Slide 28: Specific Benefits for Duals
Specific Benefits for Duals 28 Medicare Benefits Medicaid Benefits* Hospital Insurance (Part A) Copayments for Medicare services Blood, home health care, hospice care,Long Term Care hospital inpatient stay, mental health Institutional inpatient stay, skilled nursing facility HCBS (Home & Community B
Slide 29: We Currently Manage Many Dual Benefits
We Currently Manage Many Dual Benefits 29 Benefits California Washington Texas (SPD Duals) (WMIP) (STAR+PLUS) Personal Care X X Nursing Home Adult Day Care X X X Behavioral Health X X Paramedical/Nursing Services X X Meals X X Physical, Speech, and X X X Occupational Therapies Home Modifications X X
Slide 30: CMS Rate Setting Process Guidance
1 CMSRateSettingProcess Guidance 30 Sample Aggregate Savings Targets Savings targets may differ among States with low historic Under the Demonstrations Medicare spending, low utilization of institutional long- term care services, or a high penetration of Medicaid 5.0% managed care. 3.0% 1.0% Aggrega
Slide 31: Opt Out Impact On Dual Premium
Opt Out Impact On Dual Premium 31 Illustrative Example for California Partial Dual D-SNP* State/County/Region Auto Parts A, B, D Dual Eligible Population Full Dual Assignment ? Opt-Out of Medicare Managed Care Yes No Medicaid Medicaid + Medicare *Specific to California example Benefit Only Integrate
Slide 32: Strategic Priorities
Strategic Priorities 32 Mission Priorities Quality Care Current Portfolio Health plan business MMS Direct delivery Growth Organic growth Medicaid expansion Dual eligible population Our mission is to provide quality Acquisitions health services to financially RFPs vulnerable families and individuals
Slide 33: Q&A
Q&A 33 © 2012 Molina Healthcare, Inc.
Slide 34: Long-Term Growth
Long-Term Growth John Molina,Chief Financial Officer Joseph White,Chief Accounting Officer September 19, 2012 New York, New York
Slide 35: Long-Term Incremental Growth Drivers
Long-Term Incremental Growth Drivers 35 Please refer to the Company’s cautionary statements. Estimated additional revenue by 2015 as a result of duals and Medicaid 4expansion Estimated 2015 run rate ~$2B ~$12B CA: $0.3B OH: $0.5B WA: $0.3B ~$4B Other: $1.0B 3 CA: $1.2B MI: $0.9B OH: $0.5B ~$6B TX: $
Slide 36: Estimating Dual Revenue PMPM
Estimating Dual Revenue PMPM 36 Please refer to the Company’s cautionary statements. Two Molina programs could help us estimate dual eligible premiums 1 2 Program Medicaid & LTC Total Medicare Texas SNP $1,900 $700 $2,600 WMIP $1,700 $700 $2,400 Note: 1. LTC based on Florida LTC RFP Region 11 2. Ass
Slide 37: Opt Out Impact On Dual Premiums
Opt Out Impact On Dual Premiums 37 Please refer to the Company’s cautionary statements. Illustrative Example for California 10% 10% Partial Dual D-SNP* State/County/Region Parts A, B, D Auto Dual Eligible Population Full Dual Assignment Substantial Uncertainty 90% 80% ? Opt-Out of Medicare Managed ~
Slide 38: Dual Market Opportunity
Dual Market Opportunity 38 Please refer to the Company’s cautionary statements. State Estimated Number of Opt-Out Rate Molina’s Annualized Participating Duals in Potential Range Estimated Dual Premium Molina markets Enrollment Revenues California 430K 20% -80% 50K $0.9B -$1.4B Michigan 160K 20% -80%
Slide 39: Medicaid Expansion Opportunity
Medicaid Expansion Opportunity 39 State Expansion Eligibles Molina’s Estimated Annualized 1 in Medicaid Estimated Premium Premium Revenues Managed Care Enrollment PMPM California 1M 100K $100 $120M Florida not included not included not included not included Michigan 500K 100K $125 $150M New Mexico 1
Slide 40: Exchange Opportunity
Exchange Opportunity 40 State Number of Exchange Molina’s Estimated Annualized 1 Members in Molina Estimated Premium Premium Revenues Markets Exchange PMPM Enrollment California 2.2M 180K $100 $ 215M Florida 1.0M 80K $150 $145M Michigan 400K 35K $125 $50M New Mexico 100K 10K $200 $25M Ohio 500K 40K
Slide 41: Premium Rate Changes
Premium Rate Changes 41 Please refer to the Company’s cautionary statements. Health Plan Effective Date Revenue Change California 10/1/2012 unknown Florida 9/1/2012 unknown Michigan 10/1/2012 unknown New Mexico 7/1/2012 ( 0.5%) (1) Ohio 1/1/2012 ( 2%)(1) Texas 9/1/2012 4%(1) Utah 7/1/2012 ( 2%)(1) W
Slide 42: Leveraging Administrative Costs
Leveraging Administrative Costs 42 Please refer to the Company’s cautionary statements. Two types of administrative costs: Activities that improve healthcare outcomes General & administrative costs (G&A) © 2012 Molina Healthcare, Inc.
Slide 43: Activities That Improve Healthcare Outcomes
Activities That Improve Healthcare Outcomes 43 Please refer to the Company’s cautionary statements. As a % of Total Revenue Include the following services: 2.6% Utilization Management Quality Management Coordination of Medical Management Coordination of Care, CM & DM Health Education Nurse Advice Li
Slide 44: Dual Eligibles - Level of Care
Dual EligiblesLevel – of Care 44 Please refer to the Company’s cautionary statements. 10% Level IV At High Risk For Institutionalization 20% Level III Critical Event or Diagnosis Requiring Extensive Medical Care 30% Level II Medium-Risk Chronic Illness 40% Level I Episodic CareNo – or Low Risk Facto
Slide 45: Dual Eligibles Level of Care - Financial Impact
Dual Eligibles Level of Care Financial – Impact 45 Please refer to the Company’s cautionary statements. Greater portion of duals are categorized as care Level III and Level IV Require home visits Require in-home care manager assessments and visits Increased medical staffing especially for: Care Mana
Slide 46: Not All Activities That Improve Healthcare Outcomes Are Equal
Not All Activities That Improve Healthcare Outcomes Are Equal 46 Please refer to the Company’s cautionary statements. Fixed Costs Variable Costs Quality Mgmt Medical Affairs Utilization Management Service Coordination Health Education Other Nurse Advice Line © 2012 Molina Healthcare, Inc.
Slide 47: Estimated Costs of Activities That Improve Healthcare Outcomes
Estimated Costs of Activities That Improve Healthcare Outcomes 47 Please refer to the Company’s cautionary statements. Per Member Per Month As a % of Premium Revenue $50 2.2% 2.0% Current Cost Incremental Cost of Dual Eligibles (Model Care) $6 Current Dual Eligibles Current Dual Eligibles @ $260 pre
Slide 48: General & Administrative Costs
General & Administrative Costs 48 Please refer to the Company’s cautionary statements. As a % of Total Revenue Include the following: Claims 8.4% 8.2% 8.0% 8.5% 8.7% 8.6% 7.5% Information Technology Finance Operations Marketing Provider Services Legal 2006 2007 2008 2009 2010 2011 Q2-12 HR YTD Marke
Slide 49: Not All General & Administrative Costs Are Equal
Not All General & Administrative Costs Are Equal 49 Please refer to the Company’s cautionary statements. Fixed Costs Sales Other Variable Costs Marketing HR Legal IT Provider Services Claims Finance Operations Executive © 2012 Molina Healthcare, Inc.
Slide 50: Long-Term Admin Ratio Goal Below 8%
Long-Term Admin Ratio Goal Below 8% 50 G&A PMPM G&A Ratio $95 10.0% $25 8.5% 4.2% 7.5% 2.5% 2.3% 5.0% 1.3% $70 $23 $25 6.0% $7 $17 $8 5.8% 5.2% $7 3.7% $16 $17 $10 Current Duals ACA Consolidated Current Duals ACA Consolidated Corporate Subsidiaries Corporate Subsidiaries © 2012 Molina Healthcare, In
Slide 51: Q&A
Q&A 51 © 2012 Molina Healthcare, Inc.
Slide 52: Funding Our Growth
Funding Our Growth John Molina Chief Financial Officer September 19, 2012 New York, New York
Slide 53: Molina Earnings Have Funded Past Growth
Molina Earnings Have Funded Past Growth 53 Please refer to the Company’s cautionary statements. Sources of Capital Total Premium Revenue 2006 through 2Q2012 2006-2011 $12B 20% 46% $6B 34% $5B $4B $4B $2B $3B $2B Net Income Convertible Debt Common Equity Source(s): SEC Filings *CAGR calculated from 2
Slide 54: Molina Has Invested to Grow Its Business
Molina Has Invested to Grow Its Business 54 Please refer to the Company’s cautionary statements. Capital Deployment 2006 through 2Q2012 33% 27% 9% 31% Cash Paid for Acquisitions Capital Expenditures Contributions to Subsidiaries Share Repurchases Source(s): SEC Filings and Company Data © 2012 Molina
Slide 55: Earnings Margin 2006-1H2012
Earnings Margin 2006-1H2012 55 Please refer to the Company’s cautionary statements. EBITDA MARGIN AFTER TAX MARGIN Excluding Missouri Excluding write-down Missouri TX & OH Excluding Startup write-down Excluding Texas and TX & OH Missouri Texas and Startup H1N1 Flu Missouri H1N1 Flu 4.6% 4.9% 5.1% 4.
Slide 56: Preparing for Growth
Preparing for Growth 56 Please refer to the Company’s cautionary statements. Regulatory Capital Growth Capacity Estimated regulatory capital at 12/31/12 Surplus regulatory capital would contribute approximately $0.5B; compared to a to funding growth requirement of approximately $0.3B. $12B Additiona
Slide 57: Potential Capital Needs
Potential Capital Needs 57 Please refer to the Company’s cautionary statements. Est. Incremental Capital Sensitivity Low Med High Required Equity as % of Premium Revenue 2006 -2Q2012* Base Revenue $6B $6B $6B 10% Incremental $3B $4.5B $6B Revenue 8% Average 7% Total Revenue $9B $10.5B $12B 7.9% 8.1%
Slide 58: Earnings Margin 2006-1H2012
Earnings Margin 2006-1H2012 58 Please refer to the Company’s cautionary statements. EBITDA MARGIN AFTER TAX MARGIN 1. P denotes results excluding Missouri write-down in 2011, and Texas and Missouri operations in 2012 © 2012 Molina Healthcare, Inc.
Slide 59: Why We Might Want To Raise Capital?
Why We Might Want To Raise Capital? 59 Please refer to the Company’s cautionary statements. Acquisitions Convertible debt repayment in 2014 Capital expenditures Variability in profitability Timing New benefits Growth above expectations Desire for capital cushion (e.g. debt covenant and rating agenci
Slide 60: Investment Highlights
Investment Highlights 60 Please refer to the Company’s cautionary statements. 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 sign
Slide 61: Q&A
Q&A 61 © 2012 Molina Healthcare, Inc.