Molina Healthcare reveals 'aggressive' restructuring after $230m loss


Molina Healthcare reveals 'aggressive' restructuring after $230m loss

Stevanovicigor / iStock

Molina Healthcare, a provider of managed healthcare services under the Medicaid and Medicare programs and through the state insurance marketplaces, has announced its restructuring plan following poor second quarter 2017 results.

The company reported net loss of $230 million for the quarter.

"We are disappointed with our bottom-line results for this quarter and have taken aggressive and urgent steps to substantially improve our financial performance going forward," said Joseph White, chief financial officer and interim president and chief executive officer of Molina Healthcare.

As a result of the poor operating performance, the company has announced the implementation of a comprehensive restructuring and profitability improvement plan. According to Molina, the new restructuring plan is expected to reduce annualized run-rate expenses by $300 million to $400 million upon completion in 2018.

"Following a thorough review of our business operations, we have begun to implement a company-wide restructuring plan that we expect will reduce annualized run-rate expenses by between $300 million and $400 million by late 2018 when fully implemented, with approximately $200 million of these run-rate reductions expected to be achieved by the end of 2017 and in time for full realization in 2018.

White added: "In the past, we have been focused on top line growth, often at the expense of bottom line results. While we expect to enjoy continued RFP and organic growth in our Medicaid managed care business, we are now intensively focused on improved operating performance and efficiency as the path to greater profitability and shareholder returns."

Under the restructuring plan, the company is streamlining its organizational structure, including the elimination of redundant layers of management, the consolidation of regional support services, and other reductions to its workforce, to improve efficiency as well as the speed and quality of decision-making.

Molina stated that it will restructure its existing direct delivery operations, and re-design its core operating processes such as provider payment, utilization management, quality monitoring and improvement, and information technology to achieve more effective and cost-efficient outcomes.

The company is also remediating high cost provider contracts and building around high quality, cost-effective networks; it will focus on partnering with the lowest-cost vendors.

"This reduction in our workforce is a difficult, but necessary, step as we concentrate our efforts on achieving operational excellence and improved efficiency. By transforming the entire enterprise into a leaner, more streamlined organization, we can enhance our decision-making, improve our operating performance, and grow our margins," said White.

Molina Healthcare, Health, Insurance, Second quarter 2017 results, US