Molina swings to a profit in 2018 after cost-cutting
Molina Healthcare is starting to see some results from its companywide overhaul. The health insurer swung to a profit in the fourth quarter and full year 2018, after taking steps to slash medical and administrative costs.
"We have accomplished much over the last year as we executed the first phase of our margin recovery and sustainability plan," Molina President and CEO Joe Zubretsky said in a statement. "Our full year results are a capstone to a very successful beginning of this margin turnaround and growth story."
The company will hold a conference call to discuss its financial results on Tuesday morning.
Long Beach, Calif.-based Molina, which mainly serves Medicaid beneficiaries, has been on a mission to improve its profit margins since the company board tapped Zubretsky to take over as CEO in November 2017. Molina renegotiated contracts with high-cost providers and added resources to better manage the care of its beneficiaries.
In November 2018, Zubretsky told investment analysts that those actions had led to fewer emergency room visits, hospital admissions and short in-patient stays in the first nine months of the year. He also said Molina had improved its claim processes to ensure it pays for services appropriately while reducing errors and duplicate claims.
Molina has also lowered its administrative costs in part by reducing its workforce. In the first nine months of 2018, Molina had cut 600 positions, or about 5% of its staff. Last week, the company announced it would outsource its information technology operations to Infosys, which would further reduce positions, though a spokeswoman did not provide a specific number.
Those moves, among others, helped Molina turn a profit of $201 million in the last three months of 2018 ended Dec. 31, compared with a net loss of $262 million during the same quarter in 2017. For the full year, Molina posted net income of $707 million, compared with a net loss of $512 million the year before.
Despite the improved bottom line, Molina's revenue fell by 5.8% to $4.7 billion in the fourth quarter compared with the year-ago period. Revenue for the full year was $18.9 billion, down 5% year over year.
Membership dwindled to 3.8 million, down 14.2% over 2017, largely because of a planned reduction in Molina's Affordable Care Act exchange enrollment. The company pulled out of the exchanges in a couple of states in 2018, while hiking its average exchange premiums by about 60% in the states where it continued to sell plans. As a result, Molina's exchange membership fell by 453,000 members to a total 362,000 at year-end.
Medicaid membership also fell by 5% year over year to 3.5 million, while Medicare membership dipped by 3% to 98,000. Molina's total membership was 3.8 million, down 14.2% over 2017.
The insurer's medical care ratio, which represents the amount of premiums spent on medical claims and quality improvement activities, improved to 85.1% in the fourth quarter from 90.7% at the same time the year before. Similarly, Molina's MLR for the full year was 85.9%, compared with 90.6% in 2017.
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