The chief executives of two competing managed care firms kicked off the J.P. Morgan Healthcare Conference on Monday addressing a similar theme, arguing the case their company is posed to unlock more long-term organic growth.
JPM's annual conference in San Francisco, one of the industry's most influential, features some of the nation's largest nonprofit health systems, pharmaceutical firms and insurers, including rivals Centene and Molina.
The leader of Long Beach, California-based Molina was clear about strategy moving forward. The payer will use its $1.7 billion in excess capital to reinvest in the company, honing in on three areas: organic growth, inorganic growth through bolt-on acquisitions and share repurchasing.
"I'll repeat this countless numbers of times this afternoon: Our first priority is to grow the business organically. It is the most efficient use of capital," Molina CEO Joseph Zubretsky said Monday. "There is a fair amount of organic business for the taking."
The company will look to expand its market share in all three lines of business: Medicaid, Medicare and the Affordable Care Act marketplace. New procurement opportunities for Molina exist in a number of states, Zubretsky said, citing Missouri, Tennessee and Iowa.
Acquisitions will be another key driver of future organic growth. Over the past 18 months the company has built an expert team looking for very specific deals across the country, he said.
"We will not pursue capability plays. We are a managed care company. We like membership. We like premium. We like capitated risk. That's what we do, that's who we are," Zubretsky said.
Molina recently announced it was pursuing a deal to purchase a Chicago-based Medicaid managed care plan for $50 million in cash to expand its footprint there by 50,000 members. The company will look for similar deals and plans that are stumbling or underperforming.
The pitch from insurers on organic growth may stem from the fact that there are fewer big M&A plays left, influencing them to boast that their respective companies have lots of opportunities on the horizon to grow from within.
Centene CEO Michael Neidorff said that despite the company's track record of M&A, which has afforded the it significant size and scale, organic growth has fueled the company's overall trajectory.
"There's more organic growth than M&A even though people have thought the other way around," Neidorff said Monday from San Francisco.
The company has 350 different contracts across the many states it serves through various product lines. "And there is still room to continue to grow organically," he said, pointing to a chart showing that the number of current products and contracts outnumbers what the company gains through the WellCare addition.