Molina Healthcare Inc. is implementing a number of changes to its structure and operations following "disappointing" and "unacceptable" second-quarter results, interim CEO Joseph White said during an earnings call.
The company posted a second-quarter adjusted net loss of $225 million, or $4.01 per share, compared with adjusted net income of $38 million, or 67 cents per share, in the year-ago quarter. White said high medical costs and continued challenges in Affordable Care Act marketplaces have contributed to "poor" second-quarter results. Additionally, "disappointing" profitability at four of the company's health plans, Florida, Illinois, New Mexico and Puerto Rico, negatively impacted the company's second-quarter performance.
A $72 million impairment charge related to the goodwill and intangible assets of its Pathways subsidiary and a $43 million charge for restructuring and separation costs also contributed to the company's recent quarterly loss, according to a transcript of the earnings call.
To improve its performance, Molina is streamlining its organizational structure, a move that is expected to result in an estimated $200 million in annual runrate savings, White said. The initiative involves cutting the company's workforce by approximately 10%, or 1,500 employees. The first wave of the workforce reduction started July 27; affected employees will receive severance and outplacement assistance. The changes are expected to be completed by the end of the year.
Additionally, the company is redesigning its core operating processes like provider payment, utilization management, marketplace risk adjustment and quality monitoring and improvement. The company is also working on creating cost-effective networks and is reviewing its vendor base to help cut costs.
Molina Healthcare is exiting the Utah and Wisconsin ACA marketplaces, effective Dec. 31. For its remaining marketplace plans, the company is implementing premium hikes of 55% for 2018.
"The path we are on is by no means an easy one," White said. "But as we work to place our company on a solid foundation, we are reminded that many high-growth companies have walked a similar path."