Jan. 8, 2019
Joseph Zubretsky took
over Molina Healthcare at a tumultuous time in late 2017 — the board had ousted
its longtime leaders over "disappointing financial performance,"
profit margins were reportedly slim
compared to rivals and it had laid off 1,400 employees.
Despite
a strong financial performance last year, which included turning around
the profitability of
its Affordable Care Act marketplace business, a unit Zubretsky described
as an "albatross around the neck of the company," questions remain
about long-term growth.
Zubretsky addressed
those questions, or what he called "misperceptions," during J.P.
Morgan's annual conference in San Francisco on Monday.
Some
of those misperceptions include worries about whether the payer's Medicaid
margins have peaked at 2.4% and whether the company can grow revenue.
Zubretsky said
the Long Beach, California-based firm can boost Medicaid margins to between
2.5% and 3% by improving operating metrics of health plans such as utilization
trends and formulary management. "Medicaid margins can improve and in our book
of business they have not peaked at 2.4%," he said.
He
also addressed Molina's marketplace profit margin of nearly 10% after tax,
calling it incorrect to say that's unsustainable and will inevitably decline.
Rather, there is room for growth, he said. The company is the
fifth-largest marketplace plan with just a 5% market share overall. It ended
the year with 360,000 members and as of Friday had 375,000 members.
One
question that looms large is long-term revenue growth prospects. "We
get into a lot of discussions with the investment community about our ability
to grow," he said.
New
business tends to get the headlines, Zubretsky said, but large revenue gains
are coming in the company's existing portfolio.
In
Washington state, for example, market share is expected to
grow as competitors have lost certain regions. In Idaho, the
Medicaid program will expand to more members after residents voted in favor of
expansion. In Illinois, Molina will enjoy a larger footprint after the expanded
Medicaid managed care throughout the entire state. Plus, its competitor had
to freeze enrollment
after failing to meet access standards.
All
told, that's $1 billion worth of "revenue lift" this year, Zubretsky
said.
Molina
wasn't the only managed care company to pitch itself as a company poised for
growth.
Medicaid
managed care giant and Molina competitor Centene said plenty of growth
remains for the firm that has seen a meteoric rise — from generating $327
million in revenue in 2001 to $48 billion in 2017.
Centene's
targeted pipeline is $271 billion in revenue, CEO Michael Neidorff said.
"This runway is long enough that a space shuttle could do touch and
gos," he said of future growth.
Neidorff
said the company is gaining competitive advantages through its use of new
technology such as RxAdvance, a cloud-based pharmacy benefit manager. The
company is "becoming a technology company that does healthcare," he
said.
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