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.