Ousted Molina Healthcare CEO to snap up insurer's Calif. clinics

Health insurer Molina Healthcare is getting out of the primary-care business to focus on insurance, and it's quietly shutting down medical clinics in underserved areas across the country, according to its former CEO.

Dr. J. Mario Molina, who was unexpectedly ousted earlier this year from the company his father created, is in the process of buying 17 of those clinics in California that would have closed otherwise. The California clinics serve about 120,000 patients annually.

Though not yet a done deal, Mario Molina's move to purchase the clinics, some of which his father opened when he began the company in 1980, takes him back to his roots on the provider side of the healthcare system and preserves a legacy that many observers questioned would survive when Mario and his brother were no longer leading the insurer.

"We've got more than 100,000 people who are depending on us for their day-to-day healthcare and these clinics are located in medically underserved areas," Mario Molina said in an interview. Molina Healthcare "would have shut down the clinics as they are doing in the other states."

Molina Healthcare said it could not comment on ongoing negotiations and would not confirm that it is closing its primary-care clinics, or that it is selling them to Mario Molina.

"Molina is redesigning the way we directly deliver care to our members to take advantage of more efficient care delivery channels," a company spokesman said in an email. "We believe our contemplated changes with regard to direct delivery will have minimal impact on our revenues."

Mario Molina already owns the medical group that staffs the California clinics. If the deal is approved by the company board, he would acquire the clinics' assets, such as the tables and medical equipment. Molina and his brother John, who was ousted this year as chief financial officer of the insurer, are both still directors on the board. John Molina is not involved in the new business deal.

Mario Molina has already established a website for the clinics, which he is rebranding as Golden Shore Medical "so that people know that it's a different entity now," he said. He also intends to contract with other health plans in addition to Molina Healthcare. Previously, the clinics exclusively contracted with Molina.

Molina Healthcare is primarily a Medicaid managed-care insurer with $17.8 billion in revenue in 2016. It's also a major Affordable Care Act marketplace insurer, covering about 4.7 million people. But the Long Beach, Calif.-based company also owns 24 medical clinics in California, Florida, New Mexico, Washington and Utah.

But the company has its roots in providing care. Molina started as a network of medical clinics before becoming a health plan in 1994.

The insurer has been struggling financially. It recorded a $230 million loss in the second quarter of 2017, in part due to challenges in the individual marketplace. Analysts at the time said Molina's profit margins had long been below those of other managed-care insurers.

In May, on the day Molina was set to release its first-quarter 2017 financial results, the company announced that it had ousted Mario Molina and his brother John because of "disappointing financial performance." The brothers did not see it coming. Some observers speculated that Mario Molina's outspokenness on politics could have played a part.

Joseph White, the company's longtime chief accounting officer who took over as interim CEO, in August outlined a plan to restructure the company to make it more efficient and competitive. Part of that included "restructuring our existing direct delivery operations," which is how the company characterizes its medical clinics. The insurer also laid off 10% of its workforce, or about 1,500 people.

Molina Healthcare did not say it would shutter the clinics, however. On its website, four clinics in Florida and Utah are listed as closing down by Sept. 30.

Mario Molina said he hopes to finalize the deal by Jan. 1. He's in the process of having the clinics' assets appraised. He'll then work to complete the separation from Molina Healthcare, switch over the leases for the clinics and negotiate contracts with other health plans.

He's even considering practicing medicine again, as he's still a licensed physician. He has already negotiated a new contract with Molina to take effect Jan. 1, and the clinics will be up and running through the entire transition process.

"For the health plan, this is nice because it maintains continuity of care, and for the patients the same thing," Mario Molina explained. "It should be a seamless transition. For the patients, the name is going to change, but the doctors won't."