UNITED
STATES
SECURITIES
AND EXCHANGE
COMMISSION
Washington,
D.C. 20549
FORM
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): February 13, 2008
MOLINA
HEALTHCARE, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
1-31719
|
13-4204626
|
||
|
(State
of incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification Number)
|
200
Oceangate, Suite 100, Long Beach, California 90802
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (562) 435-3666
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
| Item 2.02. | Results of Operations and Financial Condition. |
On
February 13, 2008, Molina
Healthcare, Inc. issued a press release announcing its financial results
for the
fourth quarter and year ended December 31, 2007. The full text of the
press release is included as Exhibit 99.1 to this report. The
information contained in the websites cited in the press release is not part
of
this report.
The
information in this Form 8-K and
the exhibit attached hereto shall not be deemed to be “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to
the
liabilities of that section, nor shall it be deemed incorporated by reference
in
any filing under the Securities Act of 1933 or the Securities Exchange Act
of
1934, except as expressly set forth by specific reference in such a
filing.
| Item 9.01. | Financial Statements and Exhibits. |
|
(d)
|
Exhibits: | |
| Exhibit | ||
| No. | Description | |
|
99.1
|
Press
release of Molina Healthcare, Inc. issued February 13, 2008, as
to
financial results for the fourth quarter and year ended December
31, 2007.
|
SIGNATURE
Pursuant
to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to
be signed on its behalf by the undersigned hereunto duly
authorized.
|
MOLINA
HEALTHCARE, INC.
|
||||
|
Date:
February 13, 2008
|
By: /s/
Mark L. Andrews
|
|||
|
Mark
L. Andrews
Chief
Legal Officer, General Counsel,
and
Corporate Secretary
|
||||
EXHIBIT
INDEX
| Exhibit | ||
| No. | Description | |
|
99.1
|
Press
release of Molina Healthcare, Inc. issued February 13, 2008, as
to
financial results for the fourth quarter and year ended December
31, 2007.
|
News
Release
Contact:
Juan
José
Orellana
Investor Relations
Investor Relations
562-435-3666,
ext. 111143
MOLINA
HEALTHCARE REPORTS
FOURTH
QUARTER AND 2007 YEAR-END RESULTS
Long
Beach, California (February 13, 2008) – Molina Healthcare, Inc. (NYSE: MOH)
today announced its financial results for the fourth quarter and year ended
December 31, 2007.
Net
income
for the quarter ended December 31, 2007, increased to $17.9 million, or $0.63
per diluted share, compared with net income of $11.6 million, or $0.41 per
diluted share, for the quarter ended December 31, 2006.
Net
income
for the year ended December 31, 2007, increased to $58.3 million, or $2.05
per
diluted share, compared with net income of $45.7 million, or $1.62 per diluted
share, for 2006.
“As
indicated by our year-end results, 2007 was a year of accomplishment and
growth. We’re pleased with our 28% growth in net income as a result
of higher revenues and improved medical care costs,” said J. Mario Molina, M.D,
president and chief executive officer of Molina Healthcare. “The
successful integration of the Missouri health plan, the managed care expansion
in Missouri and improved utilization of services in our Ohio and Texas health
plans position our company to continue to deliver strong revenue growth and
manage medical costs in 2008.”
Earnings
Per Share Guidance
The
Company confirms the guidance it had issued on January 22, 2008, for earnings
per diluted share for fiscal year 2008 in the range of $2.25 to
$2.45.
Financial
Results – Comparison of Quarters Ended December 31, 2007 and 2006
Premium
revenue for the fourth quarter of 2007 was $670.6 million, an increase of
$126.7 million, or 23.3%, over premium revenue of $543.9 million for the fourth
quarter of 2006. Medicare premium revenue for the fourth quarter of
2007 was $17.2 million compared with $8.2 million in the fourth quarter of
2006.
Contributing
to the $126.7 million increase in quarterly premium revenues were the
following:
|
·
|
A
$79.2 million increase at the Ohio health plan principally due to
higher
enrollment.
|
|
·
|
A
$30.7 million increase as a result of the acquisition of Mercy CarePlus
in
Missouri effective October 31,
2007.
|
|
·
|
A
$23.5 million increase at the New Mexico health plan due to higher
enrollment, higher premium rates and a decrease in the premium adjustment
associated with a minimum medical care ratio contract
provision.
|
|
·
|
A
$19.8 million increase at the Texas health plan due to higher
enrollment. During the fourth quarter of 2007, the Texas health
plan reduced revenue by $2.1 million to record amounts due back to
the
state under a profit sharing
agreement.
|
|
·
|
A
$10.7 million increase at the Washington health plan due to higher
premium
rates and slightly higher
membership.
|
|
·
|
A
$5.2 million increase at the California health plan as increased
premium
rates offset lower enrollment. The California health plan added
approximately 4,300 members as a result of an acquisition in Sacramento
effective November 1, 2007.
|
These
increases in premium revenues were partially offset by the
following:
|
·
|
A
$28.1 million decrease due to the termination of operations at the
Company’s Indiana health plan effective January 1,
2007.
|
|
·
|
A
$10.3 million decrease at the Utah health plan due to reduced membership
and the write-off of $3.0 million in savings share
receivables. The Utah savings share receivable, which had been
$4.0 million at December 31, 2006 and $4.7 million at June 30, 2007,
was
reduced to zero at December 31,
2007.
|
|
·
|
A
$6.0 million decrease at the Company’s Michigan health plan due to lower
enrollment, partially offset by higher premium
rates.
|
Medical
care
costs as a percentage of premium revenue (the medical care ratio)
decreased to 83.6% in the fourth quarter of 2007 from 85.1% in the fourth
quarter of 2006, an improvement of 150 basis points
year-over-year. Sequentially, the medical care ratio decreased from
83.7% for the quarter ended September 30, 2007, an improvement of 10 basis
points.
|
·
|
The
medical care ratio of the California health plan decreased as a result
of
premium increases received during 2007 in San Bernardino/Riverside,
San
Diego and Sacramento counties. These rate increases more than
offset an increase in PMPM medical costs of approximately 1%, lowering
the
California medical care ratio from 89.3% in the fourth quarter of
2006 to
82.8% in 2007.
|
|
·
|
The
medical care ratio of the Michigan health plan increased due to higher
capitation, pharmacy and specialty fee-for-service costs, partially
offset
by lower hospital fee-for-service costs. The medical care ratio
of the Michigan health plan increased to 84.4% in the fourth quarter
of
2007 from 78.6% in fourth quarter of
2006.
|
|
·
|
The
medical care ratio of the New Mexico health plan decreased during
2007 due
to higher premium rates and a reduction in the premium adjustment
associated with a minimum medical care ratio contract provision,
partially
offset by the impact of Medicaid fee schedule
increases. Medical care costs in the fourth quarter of 2007
include $2.0 million paid for provider incentives. Absent the
adjustments made to premium revenue in the fourth quarter of 2007
and
2006, the medical care ratio in New Mexico would have been 82.0%
in the
fourth quarter of 2007 and 75.8% in the fourth quarter of
2006.
|
|
·
|
The
medical care ratio for the Ohio health plan’s Covered Families and
Children (CFC) population decreased to 86.2% in the fourth quarter
of 2007
from 88.6% in the fourth quarter of 2006. The medical care
ratio for the aged blind and disabled (ABD) population was 97.0%
in the
fourth quarter of 2007. The Ohio health plan had no ABD
membership in the fourth quarter of 2006. The medical care
ratio of the Ohio health plan increased to 90.3% from 88.6% in the
fourth
quarter of 2006 due to the addition of the ABD population in
2007. The Company expects that the Ohio ABD medical care ratio
will decrease in 2008 as a result of the 2.6% rate increase the health
plan received under its ABD contract with the state effective January
1,
2008, and the realization of improved utilization as the transition
to
managed care continues. The recent addition of the ABD members
(some of whom were not added until late summer of 2007) adds a degree
of
uncertainty to the medical care cost estimates in Ohio that is not
found
in the Company’s more mature health plans. The Company
estimates that if the 2008 medical care ratio for the CFC population
remains at 86.2% for all of 2008, the Company will need to achieve
a
medical care ratio of 91.0% for its ABD population to reach its previously
announced expectation of an 88.0% medical care ratio
plan-wide.
|
|
·
|
The
medical care ratio of the Company’s Texas health plan decreased primarily
due to very low medical costs for the Star Plus membership. As
noted above, the Company recorded a $2.1 million profit sharing liability
at December 31, 2007, as a result of low medical cost expense in
Texas. The Company does not believe that the medical care ratio
reported by the Texas health plan in the fourth quarter of 2007 is
sustainable and expects the medical care ratio to rise during 2008
to a
level consistent with consolidated
results.
|
|
·
|
The
medical care ratio of the Company’s Utah health plan increased due to the
write-off of a $3.0 million savings share receivable. Medical
care costs in Utah decreased on a PMPM basis in the fourth quarter
of 2007
when compared with the fourth quarter of 2006. Absent the
out-of-period write-off of $3.0 million in savings share receivable
in the
fourth quarter of 2007, the Utah health plan’s medical care ratio would
have been 90.2%, an improvement over the 91.8% ratio reported in
the
fourth quarter of 2006. The Company’s Utah health plan serves
the majority of its membership under a cost-plus contract with the
State
of Utah.
|
|
·
|
The
medical care ratio reported at the Company’s Washington health plan
decreased to 77.9% in the fourth quarter of 2007 from 79.5% in the
fourth
quarter of 2006. Fee-for-service specialist costs and pharmacy
costs as a percentage of premium revenue were lower in the fourth
quarter
of 2007 than in the fourth quarter of
2006.
|
|
·
|
The
termination of the Company’s operations in Indiana benefited the medical
care ratio in the fourth quarter of 2007. Absent the impact of
the Indiana plan, the medical care ratio would have decreased by
90 basis
points in the fourth quarter of 2007 to 83.7% from 84.6% in the fourth
quarter of 2006.
|
Days
in medical
claims and benefits payable were 52 days at December 31, 2007, 54 days at
September 30, 2007, and 57 days at December 31, 2006.
The
Company had previously disclosed its expectation that days in medical claims
and
benefits payable would decline as it began paying claims associated with the
Ohio and Texas start-up health plans that previously had been reported as part
of the Company’s incurred but not reported claims liability.
The
Company had also previously disclosed that claims were being paid more quickly
during 2007.
|
·
|
Billed
charges in claims inventory (as measured by the total billed charges
for
all claims received but not processed) declined by approximately
25%
between December 31, 2006 and December 31,
2007.
|
|
·
|
Billed
charges in claims inventory (as measured by the total billed charges
for
all claims received but not processed) declined by approximately
9%
between September 30, 2007 and December 31,
2007.
|
The
Company had also previously disclosed that a shift towards capitated provider
contracts would reduce days in medical claims and benefits
payable. Capitation costs were 18.0% of total medical costs for 2007,
and only 15.6% of total medical costs for 2006.
If
capitation costs and liabilities are removed from the calculation, days in
medical claims and benefits payable were 59 days at December 31, 2007, 61 days
at September 30, 2007, and 64 days at December 31, 2006.
General
and
administrative expenses were $80.5 million, or 11.8% of total revenue,
for the fourth quarter of 2007 compared with $61.0 million, or 11.1% of total
revenue, for the fourth quarter of 2006.
Core
G&A
expenses (defined as G&A expenses less premium taxes) increased to
8.8% of revenue in the fourth quarter of 2007 compared with 7.9% in the fourth
quarter of 2006.
The
increase in core G&A in comparison to the fourth quarter of 2006 is
primarily the result of increases to employee incentive compensation accruals
as
a result of the Company’s improved financial performance in 2007, as well as the
Company’s continued investment in the administrative infrastructure necessary to
support its Medicare product line and additional employee recruitment
costs. The following table details the impact of these costs on Core
G&A expense in the fourth quarters of 2007 and 2006:
|
(in
thousands)
|
2007
|
2006
|
||||||||||||||
|
%
of Total
|
%
of Total
|
|||||||||||||||
|
Amount
|
Revenue
|
Amount
|
Revenue
|
|||||||||||||
|
Medicare-related
administrative costs
|
$ | 3,760 | 0.5 | % | $ | 1,335 | 0.2 | % | ||||||||
|
Non
Medicare-related administrative costs:
|
||||||||||||||||
|
Employee
recruitmentexpense
|
1,165 | 0.2 | % | 123 | 0.0 | % | ||||||||||
|
Employee
incentive compensation
|
2,728 | 0.4 | % | (1,898 | ) | (0.3 | %) | |||||||||
|
All
other administrative expense
|
52,096 | 7.7 | % | 44,111 | 8.0 | % | ||||||||||
|
Core
G&A expenses
|
$ | 59,749 | 8.8 | % | $ | 43,671 | 7.9 | % | ||||||||
Financial
Results – Comparison of Year Ended December 31, 2007 and 2006
Premium
revenue for the year ended December 31, 2007, was $2,462.4 million, an
increase of $477.3 million, or 24.0%, over premium revenue of $1,985.1 million
for the year ended December 31, 2006. Medicare premium revenue
for 2007 was $49.3 million compared with $27.2 million in 2006.
Contributing
to the $477.3 million increase in annual premium revenues were the
following:
|
·
|
A
$341.5 million increase at the Ohio health plan principally due to
higher
enrollment.
|
|
·
|
An
$83.9 million increase at the Texas health plan due to higher
enrollment. During 2007, the Texas health plan reduced revenue
by $3.1 million to record amounts due back to the state under a profit
sharing agreement.
|
|
·
|
A
$57.2 million increase at the Company’s Michigan health plan, principally
due to the acquisition of Cape Health Plan effective May 1,
2006.
|
|
·
|
A
$46.5 million increase at the New Mexico health plan due to higher
enrollment and higher premium rates. The New Mexico health plan
reduced revenue by $6.0 million and $6.9 million in 2007 and 2006,
respectively, to meet a contractually required minimum medical care
ratio.
|
|
·
|
A
$39.2 million increase at the Washington health plan due to higher
premium
rates and slightly higher
membership.
|
|
·
|
A
$30.7 million increase as a result of the Company’s acquisition of Mercy
CarePlus in Missouri effective October 31,
2007.
|
|
·
|
A
$6.9 million increase at the California health plan as increased
premium
rates offset lower enrollment.
|
These
increases in premium revenues during 2007 were partially offset by:
|
·
|
An
$82.9 million decrease due to the termination of operations at the
Company’s Indiana health plan effective January 1,
2007.
|
|
·
|
A
$48.6 million decrease at the Utah health plan due to reduced membership
and the write-off of $4.7 million in savings share
receivables.
|
Medical
care
costs as a percentage of premium revenue (the medical care ratio)
decreased to 84.5% in the year ended December 31, 2007, from 84.6% in
2006.
|
·
|
The
medical care ratio of the California health plan decreased to 81.9%
in
2007 from 88.3% in 2006 as a result of the premium increases received
during 2007 in San Bernardino/Riverside, San Diego and Sacramento
counties. PMPM medical costs were essentially
flat.
|
|
·
|
The
medical care ratio of the Michigan health plan increased to 84.0%
in 2007
from 78.1% in 2006 due to higher capitation and pharmacy and specialty
fee-for-service costs, partially offset by lower hospital fee-for-service
costs.
|
|
·
|
The
medical care ratio of the New Mexico health plan decreased to 82.6%
for
all of 2007 from 84.6% in 2006. The decrease was the result of
higher premium rates and a reduction in the minimum medical care
ratio
premium adjustment, partially offset by the impact of Medicaid fee
schedule increases. Absent the adjustments made to premium
revenue in 2007 and 2006, the medical care ratio in New Mexico would
have
been 80.8% in 2007 and 82.0% in
2006.
|
|
·
|
The
medical care ratio of the Ohio health plan decreased to 90.4% for
2007
from 91.0% in 2006. The medical care ratio for the Ohio health
plan’s CFC population decreased to 88.5% in 2007 compared with 91.0% in
2006. During 2007, the Ohio health plan began serving the ABD
population for the first time. The medical care ratio for the
ABD population for all of 2007 was 94.7%. The Company expects
that the Ohio ABD medical care ratio will decrease in 2008 as a result
of
the 2.6% rate increase the health plan received under its ABD contract
with the state effective January 1, 2008, and the realization of
improved
utilization as the transition to managed care continues. The
recent addition of the ABD members (some of whom were not added until
late
summer of 2007) adds a degree of uncertainty to the medical care
cost
estimates in Ohio that is not found in the Company’s more mature health
plans.
|
|
·
|
The
medical care ratio of the Company’s Texas health plan decreased in 2007
primarily due to very low medical costs for the Star Plus
membership. As noted above, the Company recorded a $3.1 million
reduction to revenue in Texas during 2007 to reflect estimated amounts
due
back to the state under a profit sharing arrangement. The
Company does not believe that the medical care ratio reported by
the Texas
health plan in 2007 is sustainable and expects the medical care ratio
to
rise during 2008 to a level consistent with consolidated
results.
|
|
·
|
The
medical care ratio of the Company’s Utah health plan increased due to the
write-off of $4.7 million in savings share receivables in the second
half
of 2007. Medical care costs in Utah decreased on a PMPM basis
in 2007 when compared with 2006. Absent the out-of-period
write-off of $4.7 million in savings share receivable in the second
half
of 2007, the Utah health plan’s medical care ratio would have been 90.4%,
an improvement over the 91.5% reported for 2006. The Company’s
Utah health plan serves the majority of its membership under a cost-plus
contract with the State of Utah.
|
|
·
|
The
medical care ratio reported at the Company’s Washington health plan
increased to 79.6% in 2007 from 78.9% in 2006, principally due to
higher
fee-for-service costs.
|
|
·
|
The
termination of the Company’s operations in Indiana resulted in a 10 basis
point improvement in the Company’s medical care ratio to 84.5% in
2007. Absent the impact of the Indiana plan in both years, the
Company’s consolidated medical care ratio in 2007 would have increased 50
basis points to 84.6% from 84.1% in
2006.
|
General
and
administrative expenses were $285.3 million, or 11.5% of total revenue,
for the year ended December 31, 2007, compared with $229.1 million, or 11.4%
of
total revenue, in 2006.
Core
G&A
expenses decreased to 8.2% of total revenue for the year ended December
31, 2007, compared with 8.4% in 2006.
As
noted
above, the Company has incurred in 2007 higher employee incentive compensation,
Medicare administrative and recruitment costs. The following table
details the impact of these costs on Core G&A expense in 2007 and
2006:
|
(in
thousands)
|
2007
|
2006
|
|||||||||||||||
|
%
of Total
|
%
of Total
|
||||||||||||||||
|
Amount
|
Revenue
|
Amount
|
Revenue
|
||||||||||||||
|
Medicare-related
administrative costs
|
$ | 9,778 | 0.4 | % | $ | 3,237 | 0.2 | % | |||||||||
|
Non
Medicare-related administrative costs:
|
|||||||||||||||||
|
Employee
recruitment expense
|
2,568 | 0.1 | % | 1,769 | 0.1 | % | |||||||||||
|
Employee
incentive compensation
|
9,976 | 0.4 | % | 5,102 | 0.2 | % | |||||||||||
|
All
other administrative expense
|
182,736 | 7.3 | % | 158,172 | 7.9 | % | |||||||||||
|
Core
G&A expenses
|
$ | 205,058 | 8.2 | % | $ | 168,280 | 8.4 | % | |||||||||
Cash
Flow
Cash
provided by operating activities for the year ended December 31, 2007, was
$158.0 million, compared with $102.3 million for the same period in 2006, an
increase of $56.0 million. Cash provided by operating activities was
$45.2 million for the quarter. The primary sources of cash provided
by operating activities were net income, depreciation and amortization, and
deferred revenue at the Company’s Ohio health plan.
On
a
consolidated basis, at December 31, 2007, the Company had cash and investments
(exclusive of restricted investments) of approximately $701.9
million. The parent company had cash and investments of approximately
$98.3 million.
During
the
fourth quarter of 2007, the Company issued $200 million in senior convertible
notes. A portion of the net proceeds from the issuance of the notes
was used to pay off the $20.0 million owed on the Company’s credit facility at
September 30, 2007. During the fourth quarter, the Company paid
approximately $80.0 million to acquire Mercy CarePlus, its Missouri health
plan. Subsequent to the acquisition, the Company contributed another
$7.0 million to the Missouri health plan to fund regulatory capital
requirements. Also during the fourth quarter, the Company contributed
$32.5 million to its Ohio health plan to fund its regulatory capital
requirements and contributed an additional $5.4 million in total to several
other of the Company’s health plans.
Conference
Call
The
Company’s management will host a conference call and webcast to discuss its
fourth quarter and year-end results at 5:00 p.m. Eastern Time on Wednesday,
February 13, 2008. The telephone number for this interactive
conference call is 212-231-2900, and the live webcast of the call can be
accessed on the Company’s website at www.molinahealthcare.com,
or at www.earnings.com. An
online replay will be available beginning approximately one hour following
the
conclusion of the call and webcast.
Molina
Healthcare, Inc. is a multi-state managed care organization that arranges for
the delivery of health care services to persons eligible for Medicaid, Medicare,
and other government-sponsored programs for low-income families and
individuals. Molina Healthcare’s nine licensed health plan
subsidiaries in California, Michigan, Missouri, Nevada, New Mexico, Ohio, Texas,
Utah, and Washington currently serve approximately 1.1 million
members. More information about Molina Healthcare can be obtained at
www.molinahealthcare.com.
Safe
Harbor Statement under the
Private Securities Litigation Reform Act of 1995: This press release
contains “forward-looking statements” identified by words such as “will,”
“believes,” “expects” or ”expectations,” “anticipates,” “plans,” “projects,”
“estimates,” “intends,” and similar words and expressions. In
addition, any statements that explicitly or implicitly refer to earnings
guidance, expectations, projections, or their underlying assumptions, or other
characterizations of future events or circumstances, are forward-looking
statements. All of our forward-looking statements are based on our
current expectations and assumptions which are subject to numerous known and
unknown risks, uncertainties, and other factors that could cause actual results
to differ materially. Such factors include, without limitation, risks
related to: the successful management of our medical costs and the achievement
of our projected medical care ratios in all health plans in 2008, including
the
continuing reduction of the medical care ratio of our Ohio health plan; the
achievement of projected growth in both Medicaid and Medicare enrollment;
increased administrative costs in support of the Company's efforts to expand
its
Medicare membership; risks related to our more limited experience with Ohio,
Texas, and dual eligible members and attendant claims estimation difficulties;
funding decreases in the Medicaid, Medicare, or SCHIP programs or the failure
to
fully fund the SCHIP program; the budget crisis in California and the pressure
to reduce provider rates in that state, including current PMPM rates under
our
existing contracts; the securing of projected premium rate increases for 2008
that are consistent with our expectations, in particular in the states of
Michigan, Missouri, and Texas; our ability to accurately estimate incurred
but
not reported medical costs across all health plans; the successful renewal
and
continuation of the government contracts of all of our health plans; the
acceptance by the State of New Mexico of the contract bid of our New Mexico
health plan for the new Salud! Medicaid contract; the realization of projected
income from invested cash balances; the successful and cost-effective
integration of our acquisitions; earnings seasonality consistent with our
expectations; the availability of adequate financing to fund and/or capitalize
our acquisitions and start-up activities; high profile qui tam matters and
negative publicity regarding Medicaid managed care and Medicare Advantage;
changes in funding under our contracts as a result of regulatory or programmatic
adjustments and reforms; approval by state regulators of dividends and
distributions by our subsidiaries; the imposition of fines by state or federal
regulators for perceived operating deficiencies; membership eligibility
processes and methodologies; unexpected changes in member utilization patterns,
healthcare practices, or healthcare technologies, including an unexpectedly
severe or prolonged flu season; high dollar claims related to catastrophic
illness; changes in federal or state laws or regulations or in their
interpretation; failure to maintain effective and efficient information systems
and claims processing technology; the favorable resolution of litigation or
arbitration; competition; epidemics such as the avian flu; and other risks
and
uncertainties as detailed in our reports and filings with the Securities and
Exchange Commission and available on its website at www.sec.gov. All
forward-looking statements in this release represent our judgment as of February
13, 2008. We disclaim any obligation to update any forward-looking
statement to conform the statement to actual results or changes in our
expectations.
|
MOLINA
HEALTHCARE, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
(Dollars
in thousands, except for per share data)
|
|
(Unaudited)
|
|
Three
Months Ended
|
Year
Ended
|
||||||||||||||||||
|
December
31,
|
December
31,
|
||||||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
||||||||||||||||
|
Revenue:
|
|||||||||||||||||||
|
Premium
revenue
|
$ | 670,605 | $ | 543,912 | $ | 2,462,369 | $ | 1,985,109 | |||||||||||
|
Investment
income
|
9,024 | 5,608 | 30,085 | 19,886 | |||||||||||||||
|
Total
revenue
|
679,629 | 549,520 | 2,492,454 | 2,004,995 | |||||||||||||||
|
Expenses:
|
|||||||||||||||||||
|
Medical
care costs
|
560,839 | 462,820 | 2,080,083 | 1,678,652 | |||||||||||||||
|
General
and administrative expenses
|
80,464 | 61,032 | 285,295 | 229,057 | |||||||||||||||
|
Depreciation
and amortization
|
7,693 | 6,210 | 27,967 | 21,475 | |||||||||||||||
|
Impairment
charge on purchased software (1)
|
– | – | 782 | – | |||||||||||||||
|
Total
expenses
|
648,996 | 530,062 | 2,394,127 | 1,929,184 | |||||||||||||||
|
Operating
income
|
30,633 | 19,458 | 98,327 | 75,811 | |||||||||||||||
|
Interest
expense
|
(2,251 | ) | (717 | ) | (4,631 | ) | (2,353 | ) | |||||||||||
|
Income
before income taxes
|
28,382 | 18,741 | 93,696 | 73,458 | |||||||||||||||
|
Income
tax expense
|
10,471 | 7,097 | 35,366 | 27,731 | |||||||||||||||
|
Net
income
|
$ | 17,911 | $ | 11,644 | $ | 58,330 | $ | 45,727 | |||||||||||
|
Net
income per share:
|
|||||||||||||||||||
|
Basic
|
$ | 0.63 | $ | 0.41 | $ | 2.06 | $ | 1.64 | |||||||||||
|
Diluted
|
$ | 0.63 | $ | 0.41 | $ | 2.05 | $ | 1.62 | |||||||||||
|
Weighted
average number of common shares and
|
|||||||||||||||||||
|
potential
dilutive common shares outstanding
|
28,536,000 | 28,259,000 | 28,419,000 | $ | 28,164,000 | ||||||||||||||
|
Operating
Statistics:
|
|||||||||||||||||||
|
Medical
care ratio (2)
|
83.6 | % | 85.1 | % | 84.5 | % | 84.6 | % | |||||||||||
|
General
and administrative expense ratio (3),
|
|||||||||||||||||||
|
excluding
premium taxes
|
8.8 | % | 7.9 | % | 8.2 | % | 8.4 | % | |||||||||||
|
Premium
taxes included in general and
|
|||||||||||||||||||
|
administrative
expenses
|
3.0 | % | 3.2 | % | 3.3 | % | 3.0 | % | |||||||||||
|
Total
general and administrative expense ratio
|
11.8 | % | 11.1 | % | 11.5 | % | 11.4 | % | |||||||||||
|
Depreciation
and amortization expense ratio (4)
|
1.1 | % | 1.1 | % | 1.1 | % | 1.1 | % | |||||||||||
|
Effective
tax rate
|
36.9 | % | 37.9 | % | 37.8 | % | 37.8 | % | |||||||||||
|
(1)Amount
represents an impairment charge related to commercial software
no longer
used for operations.
|
|||||||||||||||||||
|
(2)Medical
care ratio represents medical care costs as a percentage of premium
revenue.
|
|||||||||||||||||||
|
(3)General
and administrative expense ratio represents such expenses as a
percentage
of total revenue.
|
|||||||||||||||||||
|
(4)Depreciation
and amortization expense ratio represents such expenses as a percentage
of
total revenue.
|
|||||||||||||||||||
|
MOLINA
HEALTHCARE, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
(Dollars
in thousands, except for per share
data)
|
|
Dec.
31,
|
Dec.
31,
|
||||||||
|
2007
|
2006
|
||||||||
|
(Unaudited)
|
|
||||||||
|
ASSETS
|
|||||||||
|
Current
assets:
|
|||||||||
|
Cash
and cash equivalents
|
$ | 459,064 | $ | 403,650 | |||||
|
Investments
|
242,855 | 81,481 | |||||||
|
Receivables
|
111,537 | 110,835 | |||||||
|
Income
tax receivable
|
– | 7,960 | |||||||
|
Deferred
income taxes
|
7,087 | 313 | |||||||
|
Prepaid
expenses and other current assets
|
12,522 | 9,263 | |||||||
|
Total
current assets
|
833,065 | 613,502 | |||||||
|
Property
and equipment, net
|
49,555 | 41,903 | |||||||
|
Goodwill
and intangible assets, net
|
208,930 | 143,139 | |||||||
|
Restricted
investments
|
29,019 | 20,154 | |||||||
|
Receivable
for ceded life and annuity contracts
|
29,240 | 32,923 | |||||||
|
Other
assets
|
21,675 | 12,854 | |||||||
|
Total
assets
|
$ | 1,171,484 | $ | 864,475 | |||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||||
|
Current
liabilities:
|
|||||||||
|
Medical
claims and benefits payable
|
$ | 310,089 | $ | 290,048 | |||||
|
Deferred
revenue
|
40,104 | 18,120 | |||||||
|
Income
tax payable
|
6,523 | – | |||||||
|
Accounts
payable and accrued liabilities
|
71,417 | 46,725 | |||||||
|
Total
current liabilities
|
428,133 | 354,893 | |||||||
|
Long-term
debt
|
200,000 | 45,000 | |||||||
|
Deferred
income taxes
|
8,515 | 6,700 | |||||||
|
Liability
for ceded life and annuity contracts
|
29,240 | 32,923 | |||||||
|
Other
long-term liabilities
|
15,118 | 4,793 | |||||||
|
Total
liabilities
|
681,006 | 444,309 | |||||||
|
Stockholders’
equity:
|
|||||||||
|
Common
stock, $0.001 par value; 80,000,000 shares authorized;
|
|||||||||
|
issued
and outstanding: 28,443,680 shares at December 31, 2007,
|
|||||||||
|
and
28,119,026 shares at December 31, 2006
|
28 | 28 | |||||||
|
Preferred
stock, $0.001 par value; 20,000,000 shares authorized,
|
|||||||||
|
no
shares issued and outstanding
|
–
|
||||||||
|
Additional
paid-in capital
|
185,808 | 173,990 | |||||||
|
Accumulated
other comprehensive gain (loss)
|
272 | (337 | ) | ||||||
|
Retained
earnings
|
324,760 | 266,875 | |||||||
|
Treasury
stock (1,201,174 shares, at cost)
|
(20,390 | ) | (20,390 | ) | |||||
|
Total
stockholders’ equity
|
490,478 | 420,166 | |||||||
|
Total
liabilities and stockholders’ equity
|
$ | 1,171,484 | $ | 864,475 | |||||
|
MOLINA
HEALTHCARE, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Dollars
in thousands)
|
|
(Unaudited)
|
|
Year
Ended
|
|||||||||
|
December
31,
|
|||||||||
|
2007
|
2006
|
||||||||
|
Operating
activities:
|
|||||||||
|
Net
income
|
$
|
58,330
|
$
|
45,727
|
|||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||||
|
Depreciation
and amortization
|
27,967
|
21,475
|
|||||||
|
Amortization
of capitalized credit facility fees
|
1,042
|
885
|
|||||||
|
Deferred
income taxes
|
(8,903
|
) |
(399
|
) | |||||
|
Stock-based
compensation
|
7,18888
|
5,50505
|
|||||||
|
Changes
in operating assets and liabilities:
|
|||||||||
|
Receivables
|
15,007
|
(38,847
|
) | ||||||
|
Prepaid
expenses and other current assets
|
(2,971
|
) |
1,369
|
||||||
|
Medical
claims and benefits payable
|
6,682
|
51,550
|
|||||||
|
Deferred
revenue
|
21,98484
|
10,44343
|
|||||||
|
Accounts
payable and accrued liabilities
|
17,441
|
5,188
|
|||||||
|
Income
taxes
|
14,270
|
(579
|
) | ||||||
|
Net
cash provided by operating activities
|
158,037
|
102,317
|
|||||||
|
Investing
activities:
|
|||||||||
|
Purchases
of property and equipment
|
(22,299
|
) |
(20,297
|
) | |||||
|
Purchases
of investments
|
(264,115
|
) |
(148,795
|
) | |||||
|
Sales
and maturities of investments
|
103,718
|
171,225
|
|||||||
|
Net
cash (paid) acquired in purchase transactions
|
(70,172
|
) |
5,820
|
||||||
|
Increase
in restricted investments
|
(8,365
|
) |
(912
|
) | |||||
|
Increase
in other assets
|
(4,330
|
) |
(3,334
|
) | |||||
|
Increase
in other long-term liabilities
|
9,879
|
239
|
|||||||
|
Net
cash (used in) provided by investing activities
|
(255,684
|
) |
3,946
|
||||||
|
|
|||||||||
|
Financing
activities:
|
|||||||||
|
Borrowings
under credit facility
|
–
|
50,000
|
|||||||
|
Proceeds
from issuance of convertible senior notes
|
200,000
|
–
|
|||||||
|
Repayment
of amounts borrowed under credit facility
|
(45,000
|
) |
(5,000
|
) | |||||
|
Payment
of credit facility fees
|
(551
|
) |
(459
|
) | |||||
|
Payment
of convertible senior notes fees
|
(6,498
|
) |
–
|
||||||
|
Tax
benefit from exercise of employee stock options
|
|||||||||
|
recorded
as additional paid-in capital
|
853
|
1,227
|
|||||||
|
Proceeds
from exercise of stock options and employee stock plan
purchases
|
4,257
|
|
2,416
|
||||||
|
Net
cash provided by financing activities
|
153,061
|
48,184
|
|||||||
|
Net
increase in cash and cash equivalents
|
55,414
|
154,447
|
|||||||
|
Cash
and cash equivalents at beginning of period
|
403,650
|
249,203
|
|||||||
|
Cash
and cash equivalents at end of period
|
$
|
459,064
|
$
|
403,650
|
|||||
|
MOLINA
HEALTHCARE, INC.
|
|
MEMBERSHIP
DATA
|
|
(Unaudited)
|
|
Dec.
31,
|
Sept.
30,
|
Dec.
31,
|
|||||||||||
|
Total
Ending
Membership by Health Plan:
|
2007
|
2007
|
2006
|
||||||||||
|
California
|
296,000 | 288,000 | 300,000 | ||||||||||
|
Michigan
|
209,000 | 211,000 | 228,000 | ||||||||||
|
Missouri
(1)
|
68,000 | – | – | ||||||||||
|
Nevada
(2)
|
N/A | – | – | ||||||||||
|
New
Mexico
|
73,000 | 69,000 | 65,000 | ||||||||||
|
Ohio
|
136,000 | 138,000 | 76,000 | ||||||||||
|
Texas
|
29,000 | 30,000 | 19,000 | ||||||||||
|
Utah
|
55,000 | 50,000 | 52,000 | ||||||||||
|
Washington
|
283,000 | 284,000 | 281,000 | ||||||||||
|
Subtotal
|
1,149,000 | 1,070,000 | 1,021,000 | ||||||||||
|
Indiana
(3)
|
N/A | N/A | 56,000 | ||||||||||
|
Total
|
1,149,000 | 1,070,000 | 1,077,000 | ||||||||||
|
(1) The
Company’s Missouri health plan was acquired October 31,
2007.
|
|
||||||||||||
|
(2) Less
than 1,000 members.
|
|
||||||||||||
|
(3) The
Company’s Indiana health plan ceased serving members effective January
1,
2007.
|
|
||||||||||||
|
Total
Ending Membership by State for the Company’s
|
Dec.
31,
|
Sept.
30,
|
Dec.
31,
|
||||||||||
|
Medicare
Advantage
Special Needs Plans:
|
2007
|
2007
|
2006
|
||||||||||
|
California
|
1,115 | 875 | 549 | ||||||||||
|
Michigan
|
1,090 | 814 | 152 | ||||||||||
|
Nevada
|
520 | 178 | – | ||||||||||
|
Utah
|
1,860 | 1,802 | 1,452 | ||||||||||
|
Washington
|
507 | 446 | 235 | ||||||||||
|
Total
|
5,092 | 4,115 | 2,388 | ||||||||||
|
Total
Ending Membership by State for the Company’s
|
Dec.
31,
|
Sept.
30,
|
Dec.
31,
|
||||||||||
|
Aged,
Blind and
Disabled (“ABD”) Population:
|
2007
|
2007
|
2006
|
||||||||||
|
California
|
11,837 | 10,912 | 10,717 | ||||||||||
|
Michigan
|
31,399 | 31,488 | 33,204 | ||||||||||
|
New
Mexico
|
6,792 | 6,844 | 6,697 | ||||||||||
|
Ohio
|
14,887 | 14,965 | – | ||||||||||
|
Texas
|
16,018 | 16,515 | – | ||||||||||
|
Utah
|
6,795 | 7,056 | 6,827 | ||||||||||
|
Washington
|
2,814 | 2,715 | 2,713 | ||||||||||
|
Total
|
90,542 | 90,495 | 60,158 | ||||||||||
| Quarter Ended |
Year
Ended
|
|||||||||||||||||||||
|
Total
Member Months (1)
|
Dec.
31,
|
Sept.
30,
|
Dec.
31,
|
Dec.
31,
|
Dec.
31,
|
|||||||||||||||||
|
by
Health Plan:
|
2007
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||||||
|
California
|
881,000 | 859,000 | 909,000 | 3,500,000 |
3,694,000
|
|||||||||||||||||
|
Michigan
|
630,000 | 640,000 | 688,000 | 2,597,000 |
2,365,000
|
|||||||||||||||||
|
Missouri
(2)
|
136,000 | N/A | N/A | 136,000 |
N/A
|
|||||||||||||||||
|
Nevada
|
1,000 | – | – | 1,000 |
-
|
|
||||||||||||||||
|
New
Mexico
|
214,000 | 200,000 | 191,000 | 803,000 |
726,000
|
|||||||||||||||||
|
Ohio
|
412,000 | 416,000 | 213,000 | 1,567,000 |
442,000
|
|||||||||||||||||
|
Texas
|
88,000 | 90,000 | 31,000 | 335,000 |
34,000
|
|||||||||||||||||
|
Utah
|
155,000 | 142,000 | 162,000 | 593,000 |
689,000
|
|||||||||||||||||
|
Washington
|
849,000 | 854,000 | 838,000 | 3,419,000 |
3,410,000
|
|||||||||||||||||
|
Subtotal
|
3,366,000 | 3,201,000 | 3,032,000 | 12,951,000 |
11,360,000
|
|||||||||||||||||
|
Indiana
(3)
|
N/A | N/A | 171,000 | N/A |
499,000
|
|||||||||||||||||
|
Total
|
|
3,366,000 | 3,201,000 | 3,203,000 | 12,951,000 |
11,859,000
|
||||||||||||||||
|
|
||||||||||||||||||||||
|
(1)
Total member months is defined as the aggregate of each month’s ending
membership for the period.
|
||||||||||||||||||||||
|
(2)
The Company’s Missouri health plan was acquired October 31,
2007.
|
||||||||||||||||||||||
|
(3)
The Company’s Indiana health plan ceased serving members effective January
1, 2007.
|
||||||||||||||||||||||
|
MOLINA
HEALTHCARE, INC.
|
|
SELECTED
FINANCIAL DATA BY HEALTH PLAN
|
|
(Dollars
in thousands except PMPM amounts)
|
|
(Unaudited)
|
|
Three
Months Ended December 31,
2007
|
||||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
|
Premium
Tax
|
|||||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
Care
Ratio
|
Expense
|
|||||||||||||||||||||
|
California
|
$ | 98,138 | $ | 111.48 | $ | 81,274 | $ | 92.33 | 82.8 | % | $ | 2,724 | ||||||||||||||
|
Indiana
|
11 | – | (542 | ) | – | – | – | |||||||||||||||||||
|
Michigan
|
122,087 | 193.83 | 103,067 | 163.63 | 84.4 | % | 6,551 | |||||||||||||||||||
|
Missouri
|
30,730 | 226.65 | 26,396 | 194.69 | 85.9 | % | – | |||||||||||||||||||
|
Nevada
|
2,015 | 1,370.58 | 1,705 | 1,160.11 | 84.6 | % | – | |||||||||||||||||||
|
New
Mexico
|
77,042 | 360.74 | 62,415 | 292.26 | 81.0 | % | 2,650 | |||||||||||||||||||
|
Ohio
|
124,385 | 301.65 | 112,287 | 272.31 | 90.3 | % | 5,598 | |||||||||||||||||||
|
Texas
|
24,047 | 272.35 | 13,010 | 147.35 | 54.1 | % | 458 | |||||||||||||||||||
|
Utah
|
28,434 | 183.90 | 28,360 | 183.43 | 99.7 | % | – | |||||||||||||||||||
|
Washington
|
163,716 | 192.78 | 127,562 | 150.21 | 77.9 | % | 2,727 | |||||||||||||||||||
|
Other
|
– | – | 5,305 | – | - | 7 | ||||||||||||||||||||
|
Consolidated
|
$ | 670,605 | $ | 199.27 | $ | 560,839 | $ | 166.65 | 83.6 | % | $ | 20,715 | ||||||||||||||
|
Three
Months Ended December 31,
2006
|
||||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
|
Premium
Tax
|
|||||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
Care
Ratio
|
Expense
|
|||||||||||||||||||||
|
California
|
$ | 92,910 | $ | 102.29 | $ | 82,933 | $ | 91.31 | 89.3 | % | $ | 2,820 | ||||||||||||||
|
Indiana
|
28,073 | 164.60 | 26,431 | 154.97 | 94.2 | % | – | |||||||||||||||||||
|
Michigan
|
128,096 | 186.23 | 100,746 | 146.47 | 78.6 | % | 7,723 | |||||||||||||||||||
|
New
Mexico
|
53,509 | 279.31 | 45,803 | 239.09 | 85.6 | % | 2,164 | |||||||||||||||||||
|
Ohio
|
45,196 | 212.18 | 40,050 | 188.02 | 88.6 | % | 2,028 | |||||||||||||||||||
|
Texas
|
4,228 | 135.38 | 4,307 | 137.89 | 101.9 | % | 55 | |||||||||||||||||||
|
Utah
|
38,766 | 239.46 | 35,589 | 219.84 | 91.8 | % | – | |||||||||||||||||||
|
Washington
|
153,017 | 182.46 | 121,635 | 145.04 | 79.5 | % | 2,569 | |||||||||||||||||||
|
Other
|
117 | – | 5,326 | - | - | 2 | ||||||||||||||||||||
|
Consolidated
|
|
$ | 543,912 | $ | 169.81 | $ | 462,820 | $ | 144,50 | 85.1 | % | 17,361 | ||||||||||||||
|
Year
Ended December 31, 2007
|
||||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
|
Premium
Tax
|
|||||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
Care
Ratio
|
Expense
|
|||||||||||||||||||||
|
California
|
$ | 378,934 | $ | 108.29 | $ | 310,226 | $ | 88.66 | 81.9 | % | $ | 11,338 | ||||||||||||||
|
Indiana
|
366 | – | (3,729 | ) | – | – | – | |||||||||||||||||||
|
Michigan
|
487,032 | 187.55 | 409,230 | 157.59 | 84.0 | % | 28,493 | |||||||||||||||||||
|
Missouri
|
30,730 | 226.65 | 26,396 | 194.69 | 85.9 | % | – | |||||||||||||||||||
|
Nevada
|
2,438 | 1,440.73 | 2,069 | 1,222.76 | 84.9 | % | – | |||||||||||||||||||
|
New
Mexico
|
268,115 | 333.94 | 221,567 | 275.97 | 82.6 | % | 9,088 | |||||||||||||||||||
|
Ohio
|
436,238 | 278.39 | 394,451 | 251.72 | 90.4 | % | 19,631 | |||||||||||||||||||
|
Texas
|
88,453 | 263.90 | 68,173 | 203.40 | 77.1 | % | 1,598 | |||||||||||||||||||
|
Utah
|
116,907 | 197.19 | 109,895 | 185.36 | 94.0 | % | – | |||||||||||||||||||
|
Washington
|
652,970 | 190.96 | 519,763 | 152.00 | 79.6 | % | 10,844 | |||||||||||||||||||
|
Other
|
186 | – | 22,042 | - | - | 28 | ||||||||||||||||||||
|
Consolidated
|
$ | 2,462,369 | $ | 190.13 | $ | 2,080,083 | $ | 160.62 | 84.5 | % | $ | 81,020 | ||||||||||||||
|
Year
Ended December 31,
2006
|
||||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
|
Premium
Tax
|
|||||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
Care
Ratio
|
Expense
|
|||||||||||||||||||||
|
California
|
$ | 372,071 | $ | 100.74 | $ | 328,532 | $ | 88.95 | 88.3 | % | $ | 11,738 | ||||||||||||||
|
Indiana
|
82,946 | 166.29 | 79,411 | 159.20 | 95.7 | % | – | |||||||||||||||||||
|
Michigan
|
429,835 | 181.73 | 335,696 | 141.93 | 78.1 | % | 25,982 | |||||||||||||||||||
|
New
Mexico
|
221,597 | 305.07 | 187,460 | 258.08 | 84.6 | % | 8,203 | |||||||||||||||||||
|
Ohio
|
94,751 | 214.25 | 86,249 | 195.03 | 91.0 | % | 4,265 | |||||||||||||||||||
|
Texas
|
4,508 | 133.37 | 4,688 | 138.70 | 104.0 | % | 79 | |||||||||||||||||||
|
Utah
|
165,507 | 240.10 | 151,417 | 219.66 | 91.5 | % | – | |||||||||||||||||||
|
Washington
|
613,750 | 179.98 | 484,435 | 142.06 | 78.9 | % | 10,506 | |||||||||||||||||||
|
Other
|
144 | – | 20,764 | - | - | 4 | ||||||||||||||||||||
|
Consolidated
|
|
$ | 1,985,109 | $ | 167.39 | $ | 1,678,652 | $ | 141.55 | 84.6 | % | $ | 60,777 | |||||||||||||
|
MOLINA
HEALTHCARE, INC.
|
|
DETAIL
OF MEDICAL CARE COSTS
|
|
(Dollars
in thousands, except PMPM amounts)
|
|
(Unaudited)
|
|
The
following table provides detail of the Company’s medical care
costs:
|
||||||||||||||||||||||||
|
Three
Months Ended
|
Three
Months Ended
|
|||||||||||||||||||||||
|
December
31, 2007
|
December
31, 2006
|
|||||||||||||||||||||||
|
%
of Total
|
%
of Total
|
|||||||||||||||||||||||
|
Medical
|
Medical
|
|||||||||||||||||||||||
|
Amount
|
PMPM
|
Care
Costs
|
Amount
|
PMPM
|
Care
Costs
|
|||||||||||||||||||
|
Medical
care costs:
|
||||||||||||||||||||||||
|
Fee-for-service
costs
|
$ | 359,536 | $ | 106.84 | 64.0 | % | $ | 310,103 | $ | 96.82 | 67.0 | % | ||||||||||||
|
Capitation
|
98,464 | 29.26 | 17.6 | % | 73,479 | 22.94 | 15.9 | % | ||||||||||||||||
|
Pharmacy
|
76,009 | 22.59 | 13.6 | % | 60,508 | 18.89 | 13.1 | % | ||||||||||||||||
|
Other
|
26,830 | 7.97 | 4.8 | % | 18,730 | 5.85 | 4.0 | % | ||||||||||||||||
|
Total
medical
|
||||||||||||||||||||||||
|
care
costs
|
$ | 560,839 | $ | 166.66 | 100.0 | % | $ | 462,820 | $ | 144.50 | 100.0 | % | ||||||||||||
|
Year
Ended
|
Year
Ended
|
|||||||||||||||||||||||
|
December
31, 2007
|
December
31, 2006
|
|||||||||||||||||||||||
|
%
of Total
|
%
of Total
|
|||||||||||||||||||||||
|
Medical
|
Medical
|
|||||||||||||||||||||||
|
Amount
|
PMPM
|
Care
Costs
|
Amount
|
PMPM
|
Care
Costs
|
|||||||||||||||||||
|
Medical
care costs:
|
||||||||||||||||||||||||
|
Fee-for-service
costs
|
$ | 1,343,911 | $ | 103.77 | 64.6 | % | $ | 1,125,031 | $ | 94.86 | 67.0 | % | ||||||||||||
|
Capitation
|
375,206 | 28.97 | 18.0 | % | 261,476 | 22.05 | 15.6 | % | ||||||||||||||||
|
Pharmacy
|
270,363 | 20.88 | 13.0 | % | 209,366 | 17.65 | 12.5 | % | ||||||||||||||||
|
Other
|
90,603 | 7.00 | 4.4 | % | 82,779 | 6.98 | 4.9 | % | ||||||||||||||||
|
Total
medical
|
||||||||||||||||||||||||
|
care
costs
|
$ | 2,080,083 | $ | 160.62 | 100.0 | % | $ | 1,678,652 | $ | 141.54 | 100.0 | % | ||||||||||||
|
MOLINA
HEALTHCARE, INC.
|
|
CHANGE
IN MEDICAL CLAIMS AND BENEFITS PAYABLE
|
|
(Dollars
in thousands)
|
|
(Unaudited)
|
|
The
following table shows the components of the change in medical
claims and
benefits payable for the year ended December 31, 2007 and
2006:
|
|
Year
Ended
|
||||||||
|
December
31,
|
||||||||
|
2007
|
2006
|
|||||||
|
Balances
at beginning of period
|
$ | 290,048 | $ | 217,354 | ||||
|
Medical
claims and benefits payable from business acquired during
the
period
|
13,359 | 21,144 | ||||||
|
Components
of medical care costs related to:
|
||||||||
|
Current
year
|
2,136,381 | 1,716,256 | ||||||
|
Prior
years
|
(56,298 | ) | (37,604 | ) | ||||
|
Total
medical care costs
|
2,080,083 | 1,678,652 | ||||||
|
Payments
for medical care costs related to:
|
||||||||
|
Current
year
|
1,851,035 | 1,443,843 | ||||||
|
Prior
years
|
222,366 | 183,259 | ||||||
|
Total
paid
|
2,073,401 | 1,627,102 | ||||||
|
Balances
at end of period
|
$ | 310,089 | $ | 290,048 | ||||
|
Benefit
from prior period as a percentage of premium revenue
|
2.3 | % | 1.9 | % | ||||
|
Benefit
from prior period as a percentage of balance at beginning
of
period
|
19.4 | % | 17.3 | % | ||||
|
Benefit
from prior period as a percentage of total medical care
costs
|
2.7 | % | 2.2 | % | ||||
|
The
Company’s claims liability includes an allowance for adverse claims
development based on historical experience and other factors
including,
but not limited to, variation in claims payment patterns,
changes in
utilization and cost trends, known outbreaks of disease,
and large
claims. The Company’s reserving methodology is consistently
applied across all periods presented. Accordingly, any benefit
recognized in medical care costs resulting from favorable
development of
an estimated liability at the start of the period (captured
as a component
of “medical
care costs
related to prior years”) may be offset by the addition of an
allowance for adverse claims development when estimating
the liability at
the end of the period (captured as a component of “medical
care costs related to
current year”).
|
||||||||
|
Year
Ended
|
||||||||
|
December
31,
|
||||||||
|
2007
|
2006
|
|||||||
|
Days
in claims payable
|
52 | 57 | ||||||
|
Number
of members at end of period
|
1,149,000 | 1,077,000 | ||||||
|
Number
of claims in inventory at end of period (1)
|
161,395 | 260,958 | ||||||
|
Billed
charges of claims in inventory at end of period (in thousands)
(1)
|
$ | 211,958 | $ | 285,385 | ||||
|
Claims
in inventory per member at end of period (1)
|
0.14 | .26 | ||||||
|
(1)
2006 claims data excludes information for Cape Health
Plan
membership of approximately 83,000 members. Cape membership was
processed on a separate claims platform through December
31,
2006.
|
||||||||