Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — J.P. Morgan Healthcare Conference 2019
29 slides from Molina Healthcare's conference presentation, Jan 7, 2019
Slide 1: Molina Healthcare, Inc. J.P. Morgan Healthcare Conference
Molina Healthcare, Inc.J.P. Morgan Healthcare Conference Joe ZubretskyPresident & Chief Executive OfficerJanuary 7, 2019
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 forward-looking statements regarding, without limitation, our business, operations, turnaround, plans, guidance, projections, and lo
Slide 3: Today's Agenda
Today’s Agenda Today’s presentation will provide management’s perspective on the following market misperceptions: Misperception 1: Much of the profit improvement previously disclosed by Molina has been harvested in 2018 Misperception 2: At 2.4%, Molina’s after-tax Medicaid margins have peaked Misper
Slide 4: Molina: A Solid Start in 2018; Significant Opportunity for Future Growth
High quality 2018 earnings create a solid baseline for growth Molina: A Solid Start in 2018; Significant Opportunity for Future Growth All amounts are estimates; actual results may differ materially. See the Company’s risk factors as discussed in its 2017 Form 10-K and other reports and filings with
Slide 5: Profit Improvement Opportunity
Profit Improvement Opportunity
Slide 6: Misperception 1: Profit improvement has been harvested in 2018
Profit Improvement Opportunity Reality Misperception 1: Much of the profit improvement previously disclosed by Molina has been harvested in 2018 2018 earnings benefited from early identifiable initiatives focusing on managed care fundamentals Most of the more complex initiatives with high value are
Slide 7: Profit Improvement Opportunity: Margin Recovery Area
Profit Improvement Opportunity Margin Recovery Area Original MidpointEstimate Medical Costs Utilization and High-Acuity Care Management $90 Pharmacy $60 Provider Contracting $100 Claims and Payment Integrity $25 Sub-Total $275 Admin Costs Corporate SG&A $125 Revenue At-Risk Revenue $100 Total Estima
Slide 8: After-Tax Medicaid Margins Can Improve
After-Tax MedicaidMargins Can Improve
Slide 9: Misperception 2: Medicaid after-tax margins have peaked
Reality Misperception 2: At 2.4%, Molina’s after-tax Medicaid margins have peaked Our Medicaid MCRs are 100 to 200 basis points higher than “best in class” Some of our operating metrics in many of our plans are still “under market” The remaining profit improvement described previously inures primari
Slide 10: Metrics Targeted for Improvement
After-Tax Medicaid Margins Can Improve There is substantial room for improvement to bring our current operating metrics in line with “best in class” Metrics We Have Targeted For Improvement Utilization Hospital AdmissionsER UsageHigh-cost Outlier CasesShort StaysObservation Days Pharmacy Scripts Per
Slide 11: MCR and After-Tax Margin Opportunity
After-Tax Medicaid Margins Can Improve By approaching “best in class” operating metrics, Molina’s Medicaid MCR can improve by 100 - 200 basis points Pure performance excludes the impact of the retroactive California risk corridor adjustment MCR and After-Tax Margin Opportunity Year to Date Pure Perf
Slide 12: Marketplace Profit Dollars Can Grow
Marketplace ProfitDollars Can Grow
Slide 13: Recent ACA Court Ruling
Company perspective following the ruling Recent ACA Court Ruling ACA will remain in effect for 2019, and we expect that through appeals process ACA will remain in effect in its present form thereafter Given strong consensus that recent ruling will not survive on appeal, it is premature to comment on
Slide 14: Misperception 3: Marketplace profit declines are inevitable
Reality Misperception 3: Because Molina’s current Marketplace margins are unsustainable, Marketplace profit declines are inevitable For Molina, the adjustment to our reported MCR for federal purposes is securely above the minimum Our future profitable years do not rely on prior unprofitable years to
Slide 15: Illustrative 2018 Marketplace pure performance metrics
Marketplace Profit Dollars Can Grow Illustrative full year 2018 Marketplace pure performance financial metrics Pure performance excludes the impact of the 2017 Marketplace risk adjustment and CSR subsidiesExcludes the impact of the Health Insurance Fee (HIF) and utilizes a tax rate of ~25% for compa
Slide 16: Reported MCR securely above 80% federal minimum
Marketplace Profit Dollars Can Grow Our reported MCR for federal purposes is securely above the 80% federal minimum ~70% Approximate Marketplace Full Year MCR 80-82% Approximate MCR under Federal Rules
Slide 17: Federally prescribed adjustments to MCR
Marketplace Profit Dollars Can Grow Federally prescribed adjustments to reported amounts place us securely above the minimum with room to spare Numerator Reported Medical Cost Risk Adjustment QAExpense AdjustedMedical Cost Denominator ReportedPremium Revenue Taxes And Fees FederalIncome Tax Adjusted
Slide 18: Marketplace earnings growth scenario analysis
Marketplace Profit Dollars Can Grow Marketplace earnings growth scenario analysis (pure performance) Scenario 1: Margin OptimizationPremium Revenue +40% ~ $2.6B ~ 73% ~ 17% ~ $285M ~ $215M ~ 8% Scenario 2: Market Share Gain Premium Revenue +90% ~ 3.6B ~ 75% ~ 17% ~ $310M ~ $235M ~ 6% Premium Revenue
Slide 19: 2019 Marketplace Membership Update
We remain very competitive with an excellent foundation for future growth despite our conservative rating strategy 2019 Marketplace Membership Update Marketplace Enrollment ~360K ~375K Filed rates in April 2018, before the profitability of the 2018 business was certainConservatively filed a 4% rate
Slide 20: Molina Can Grow Revenues
a ee BRRMOLINA HEALTHCARE Molina Can Grow Revenues
Slide 21: Misperception 4: Molina will be challenged to grow revenues
Reality Misperception 4: Once Molina’s margins are restored and sustained, the company will be challenged to grow revenues The existing business portfolio is ripe with near term revenue opportunities ready to harvest The longer term growth engine is currently being built The new management team has
Slide 22: Near-term growth opportunities in existing portfolio
Molina Can Grow Revenues Near-term growth opportunities in existing portfolio create more than $1.0 billion of revenue lift into 2019 Mississippi Medicaidstartup, full yearmembership and CHIP award IllinoisFull year membership fromstatewide expansion and competitor enrollment freeze IdahoFully Integ
Slide 23: RFP capture abilities being built and enhanced
RFP Process Hired new RFP leadership in late 2018Redesigned entire RFP process Deeply engaged executive management team at all phases of the RFP processRecent successes: Washington, Puerto Rico, Mississippi CHIPPending awards: Texas STAR PLUS, STAR and CHIP (high degree of confidence) Business Devel
Slide 24: Drivers of Government Sector Growth
Drivers of Government Sector Growth Molina Can Grow Revenues Government segments are the largest and fastest growing within healthcare MedicaidUnderlying population growthMedicaid expansion growth and increasing coverage/benefitsDualsGrowing aging populationIncreased Medicaid coverage and integratio
Slide 25: Longer-term embedded opportunities within existing portfolio
Longer term, there are significant embedded opportunities within our existing portfolio Molina Can Grow Revenues Core Drivers TX STAR PLUS and DSNPMarketplace and/or Medicare expansion in IL, SC, MS, and PRMedicaid expansion in MS, UTIL, and OH LTSS carve-inMI BH opportunity Higher Penetration in Cu
Slide 26: Key Takeaways from Today's Presentation
Key Takeaways from Today’s Presentation 3 Our Marketplace business has multiple paths to allow us to achieve growth in profits 4 Molina’s near and long term revenue opportunities are attractive and we are well-positioned to pursue them 1 Significant profit improvement opportunities remain post 2018
Slide 27: ARRMOLINA
a a ee ARRMOLINA HEALTHCARE
Slide 28: Appendix
@@ wv BRRMOLINA HEALTHCARE Appendix
Slide 29: Non-GAAP Reconciliation of EBITDA
Non-GAAP Reconciliation of EBITDA Appendix $585 120 115 285 1,105M Net Income Adjustments: Depreciation, and amortization of intangible assets and capitalized software Interest Expense Income Tax Expense EBITDA $600 120 115 290 1,125M (in millions) Low End High End 2018 Guidance
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