Molina Healthcare poised for healthy growth

Molina Healthcare Inc. of Long Beach was looking after the medical needs of low-income people long before Obamacare debuted.

Molina Healthcare began 33 years ago after emergency room physician C. David Molina had seen too many poor people with easily treatable and preventable illnesses. He opened three small clinics in Long Beach to serve them.

The company currently offers Medicaid-related, licensed health plans for low-income families and individuals in California and nine other states.

Molina Healthcare doesn’t sell to employers or consumers; rather, it serves exclusively as a managed-care plan for government programs such as Medicaid and Medicare. A subsidiary, Molina Healthcare Solutions, provides business processing and information technology services to Medicaid agencies in Idaho, Louisiana, Maine, New Jersey and West Virginia.

C. David Molina died in 1996, but the company remains a family affair. One son, Joseph Mario, is chairman, chief executive and president. Another, John, is treasurer.

“We’re in four of the five largest Medicaid markets in the country, and we are well-positioned to capture membership,” J. Mario Molina recently told a conference of investors.

Molina Healthcare went public in July 2003, raising $107 million with an opening price of $17.50. The stock ended the first trading day at $20 a share; it closed Friday at $32.75.

The investment research team at Market Realist said Molina has promising positions.

Molina Healthcare “should directly benefit from healthcare reform as states like California, Michigan, and Washington expand their Medicaid rolls,” the Market Realist analysis said.

“In addition, there is a robust pipeline of contract opportunities transitioning state Medicaid programs from traditional government fee-for-service mechanisms to managed care.”

Zacks Investment Research has a mixed opinion on the company. Molina Healthcare barely missed Zacks’ consensus sales estimate of $1.71 billion in the third quarter. But Zacks noted that Molina Healthcare’s premium revenues were up 9% in the third quarter, compared with a year earlier.

The Latest

In the third quarter, Molina Healthcare’s sales grew to $1.7 billion, from $1.4 billion in the year-earlier quarter. Net profit rose to $7.6 million, compared with $3.4 million a year earlier.

This month, the company said its Michigan subsidiary had been chosen to participate in a demonstration project to improve care coordination for individuals enrolled in Medicare and Medicaid.

Also this month, Molina Healthcare announced a partnership with TracFone Wireless and Voxiva Inc. to enhance contact with members through healthcare service announcement texts on free cellphones.

Accomplishments

Molina Healthcare has come a long way. Now, it’s a Fortune 500 company with 1.9 million members.

Molina Healthcare has also become one of the nation’s largest Latino-owned businesses.

Challenges

Molina Healthcare expects to double its revenue by 2015 because of the addition of more lower-income people who are eligible for healthcare coverage.

That presents a huge challenge in terms of hiring thousands of workers and acquiring the infrastructure needed to host them.

The company’s workforce has already grown from less than 6,000 two years ago to about 8,000 now. It may expand by an additional 2,000 employees in the next two years.

“It’s a matter of finding the right people and the facilities,” Treasurer John Molina said. “We’ve opened up 2,000 new positions this year alone, and we need to make sure they understand the Molina way of doing things.”

Analysts

Among the 15 analysts who regularly cover the company, five have it rated as a strong buy. Market Realist considers Molina Healthcare’s stock undervalued by as much as 20%. One analyst rates it as a buy. Nine analysts, including Zacks, have Molina Healthcare rated as a stock to hold.

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Twitter: @RonDWhite