Navigating the murky waters of federal health care plans is no easy feat, but Molina Healthcare's mission is to help Medicaid and Medicare members find their way to health care. Its Health Plan segment arranges for the delivery of health services to some 3.5 million people who receive their care through Medicaid, Medicare, and other government-funded programs in 11 states. Its Medicaid Solutions segment provides business process outsourcing (BPO) solutions to Medicaid agencies in five states for their Medicaid Management Information Systems (MMIS), the tool used to support administration of state health care entitlement programs. The family of founder C. David Molina controls the company through holdings and trusts.
Altogether, Molina's operations provide plans or services to 3.5 million individuals in a dozen states. Molina's health plans segment accounts for a majority (98% in 2014) of revenues. The company's health plans provide medical services through state networks of contracted hospitals and physicians that accept Molina health plan coverage.
Molina's health plans primarily operate in Washington, California, South Carolina, Texas, Ohio, and Michigan, as well as in New Mexico, Utah, Florida, and Wisconsin. The Medicaid Solutions business provides IT services in Idaho, Louisiana, Maine, New Jersey, West Virginia, and the US Virgin Islands; it also administers a drug rebate program in Florida.
A third component of the company, referred to as the direct delivery line of business (reported within the health plans segment), consists of about 25 primary care community clinics in California, Florida, New Mexico, and Washington.
Molina's health plans segment leases 70 facilities, while the Medicaid solutions segment leases a dozen facilities.
Molina has reported steady revenue increases over the last few years; in 2014, revenue rose 27% to $9.7 billion on growth across both segments. The health plans segment saw a 28% rise in membership (due to Medicaid expansion as a result of the Affordable Care Act), as well as an 18% increase in monthly revenue per member. The Molina Medicaid solutions segment also saw growth in 2014 on higher Medicaid transaction volumes.
After two years in declines, net income has rebounded in 2013 and 2014. Revenue increases drove profits up 18% to $62 million in 2014. Cash flow from operations spiked 458% to $1.1 billion that year as more cash was generated by medical claims and other accounts payable.
Molina grows in its existing markets by increasing services and adding physicians to its provider networks. It also looks to add new members by increasing its brand awareness through marketing and advertising campaigns. In addition, Molina enters new markets through both organic measures and through acquisitions, targeting entry into large markets with competitive provider communities. In 2013 it added new members in New Mexico and South Carolina by purchasing other plans' contracts. In 2014 Molina acquired two Medicaid contracts in Florida, adding some 73,000 new members. Later that year, it secured a contract to administer Puerto Rico's Medicaid program in a couple of regions, adding some 350,000 new members.
Molina's growth strategy also consists of opening additional primary care clinics in existing and new territories. The addition of more clinics helps Molina diversify its operations by expanding its involvement in the direct delivery of primary care. About 20% of Molina's California health plan membership is being served by its primary care clinics there.
Growing the direct delivery component of its business also helps Molina prepare for health care reform changes. Components of the health care reform bill call for increased health insurance coverage and changes to the way government health plans are reimbursed, which could impact the company's financial returns on health plan operations. In addition, Molina sees opportunities in the Affordable Care Act's provisions to expand state Medicaid programs, as well as by participating in dual eligibility programs designed to improve the coordination of care for members that are eligible for coverage under Medicaid and Medicare plans.
Mergers and Acquisitions
In 2015 Molina Healthcare of Michigan agreed to buy certain assets of HealthPlus of Michigan, expanding its operations in the state. The deal will include assets of HealthPlus' Medicaid and MIChild (for uninsured children) businesses. Later that year, Molina Healthcare of Florida agreed to buy assets of Preferred Medical Plan's Medicaid business in Florida, while Molina Healthcare of Illinois planned to enter the Chicago market with the acquisition of certain assets of Accountable Care Chicago (aka MyCare Chicago). The Illinois unit also plans to buy certain Cook County-based Medicaid assets of accountable care entity Better Health Network.
Another deal was the acquisition of Providence Human Services (which provides behavioral and mental health services in more than 20 states) and Providence Community Services from The Providence Service Corporation for some $200 million. Those companies will now operate under the Pathways brand.
Founded in 1980, Molina Healthcare is headed by founder C. David Molina's sons: Dr. J. Mario Molina, who serves as chairman and CEO, and John C. Molina, who is a director and the company's CFO.