Apr 30, 2012
Executives
Juan Jose Orellana - Vice President of Investor Relations Joseph Mario Molina - Chairman, Chief Executive Officer and President John C. Molina - Chief Financial Officer, Executive Vice President of Financial Affairs, Treasurer, Director and Member of Compliance Committee Joseph W.
White - Chief Accounting Officer Terry P. Bayer - Chief Operating Officer
Analysts
Joshua R. Raskin - Barclays Capital, Research Division Charles Andrew Boorady - Crédit Suisse AG, Research Division Carl R.
McDonald - Citigroup Inc, Research Division Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division Christian Rigg - Susquehanna Financial Group, LLLP, Research Division David H.
Windley - Jefferies & Company, Inc., Research Division Melissa McGinnis - Morgan Stanley, Research Division Sarah James - Wedbush Securities Inc., Research Division
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the Molina Healthcare First Quarter 2012 Earnings Conference Call.
[Operator Instructions] As a reminder, this conference is being recorded, Monday, April 30, 2012. I would now like to turn the conference over to Mr.
Juan José Orellana, Vice President of Investor Relations. Please go ahead, sir.
Juan Jose Orellana
Thank you, Francisco. Hello, everyone, and thank you for joining us.
The purpose of this call is to discuss Molina Healthcare's financial results for the first quarter, ended March 31, 2012. The company's earnings release reporting its results was issued today after the market closed and is now posted for viewing on our company website.
Participating for Molina today will be Dr. Mario Molina, our CEO; John Molina, our CFO; Terry Bayer, our COO; and Joseph White, our Chief Accounting Officer.
After the completion of our prepared remarks, we will open the call to take your questions. [Operator Instructions].
Our comments today will contain forward-looking statements under the Safe Harbor provisions of the Private Securities litigation Reform Act, including statements regarding our Ohio contract appeal, our Texas and California operations, our expansion opportunities with regards to dual eligible integration programs and our earnings per share guidance for 2012. All of our forward-looking statements are based on our current expectations and assumptions, which are subject to numerous risk factors that could cause our actual results to differ materially.
A description of such risk factors can be found in our earnings release and in our reports filed with the Securities and Exchange Commission, including our form 10-K annual report for fiscal year 2011, our form 10-Q quarterly reports and our Form 8-K current reports. These reports can be accessed under the Investor Relations tab of our company website or on the SEC's website.
All forward-looking statements made during today's call represent our judgment as of April 30, 2012, and we disclaim any obligation to update such statements. This call is being recorded, and a 30-day replay of the conference call will be available over the Internet through the company's website at molinahealthcare.com.
I would now like to turn the call over to Dr. Mario Molina.
Joseph Mario Molina
Thank you, Juan José. Hello, everyone, and thank you for joining our conference call today.
We are pleased that our financial results for the first quarter of 2012 met our expectations. In addition, we're excited about the progress being made with the integration of dual eligible beneficiaries into programs across the country.
We believe that our participation in such managed care growth opportunities will contribute to the long-term growth prospects for our company. Before we get further into discussing the quarter and the opportunities ahead of us, I would like to take a moment to talk about our Ohio Medicaid contract.
Recently, the Ohio Department of Jobs and Family Services notified our Ohio health plan that it had not been selected for a contract under the recent Ohio Medicaid managed care Request For Applications or RFA. As a result of not being selected, our existing contract with the state will expire without renewal on December 31, 2012.
However, since the contract remains in place until the end of this year, it will not have a negative impact on our full year 2012 estimates of $1.75 per share, which we reaffirmed today. Although we're disappointed with this outcome, Molina Healthcare remains committed to serving the state of Ohio, our providers and, most importantly, our members.
Molina has pursued its rights of appeal and has filed, as have 4 other health plans, a formal protest with the Ohio Department of Jobs and Family Services. Our protest challenges the scoring of Molina's submission pursuant to the RFA and identifies scoring errors that, if corrected, could alter the previously announced RFA results.
While the exact timing of a potential resolution to our protest remains uncertain, we believe that a ruling should occur relatively soon, given the implementation timelines and readiness requirements of the program. Now let's get back to our first quarter results.
Earnings per diluted share for the quarter were $0.39 per share or $18 million in net income. Our established health plans continue to perform well, and as we are even more strongly engaged in key states such as Texas and California.
Revenues at our Texas plan more than doubled when compared to the first quarter 2011, adding nearly $1 billion in new annualized revenues and 125,000 new members as part of the managed care expansion which went into effect March 1 of this year. As a reminder, late last year, we won new contracts to administer the STAR and STAR+ programs in the El Paso and Rio Grande Valley service areas as well as the STAR and CHIP programs in the Dallas service area.
At the end of the first quarter, our Texas health plan became Molina's third-largest health plan in terms of both the revenue and enrollment. In addition, our preliminary enrollment data for the month of April suggest that Texas health plan could become our second largest plan in the not-too-distant future.
In California, our health plan revenues grew at about 20% year-over-year, with the addition of over 23,000 new ABD lives as the result of the transition of seniors and persons with disabilities or SPDs, as we call them in California, into managed care. We're very excited about our participation in this program.
It solidifies our current base as well as builds on our experience in arranging for healthcare services for patients with more complex healthcare needs. As we have highlighted in the past, scale and experience with more complex patients are key competencies that strongly position Molina to capitalize on one of the largest growth opportunities for Managed Care: The integration of the dual eligible beneficiaries into managed care.
The value of participating in the California Medicaid program, our growing experience with ABD enrollment and the inclusion of duals into managed care are strategic imperatives that we have been stressing with the investor community for quite some time. But it was not until earlier this month that all of these related strategic priorities converged.
All of our efforts came to fruition when the California Department of Health Care Services announced its initial selection of the first 4 counties and the health plans which will participate in the state's dual eligible care coordination demonstration project. I'm pleased to report that Molina was selected to participate as an integrated health plan for its duals demonstration project in San Diego County, where approximately 75,000 dual eligible beneficiaries reside.
In addition, Molina will also participate in the duals demonstration project for Los Angeles County as a subcontracted health plan. Nearly 374,000 dual eligible beneficiaries reside in Los Angeles County.
Enrollment across the 4 selected counties is scheduled to begin in January of 2013. A key feature of the California dual eligible proposal is that the initial participation in the program is restricted to health plans that currently participate in the state's Medicaid program.
This approach is very similar to that implemented in the managed care transition for California's SPD members, where the state chose to work with health plans that have existing contracts with the state for the Medicaid program. Next, the state will be submitting its proposal to CMS for approval in May, and a response from CMS is expected in the month of June.
While California leads the nation's efforts to integrate duals into Managed Care, other states are rapidly following. In Texas, the state released earlier this month its initial proposal to begin moving its dual eligible beneficiaries into managed care.
The Texas Health and Human Services Commission estimates that there are approximately 214,000 dual eligible beneficiaries that will be included in the demonstration project. Similar to California, participation in the Texas duals demonstration will be initially limited to health plans that have both a STAR+ agreement with the state and a Medicare Advantage Special Needs Plan agreement with CMS.
As of March 31, Molina Healthcare Texas served approximately 109,000 STAR+ members, making us the second largest STAR+ contractor in the state of Texas. Our enrollment in our SNP product in Texas has also grown steadily.
We believe our scale and experience coordinating benefits for the STAR+ membership as well as our dedicated focus on Special Needs Plans will provide a strong foundation for the proposed demonstration in Texas. Texas is expected to submit its application to CMS at the end of May, and enrollment is currently scheduled to begin in January of 2014.
Last week, the state of Ohio released its Request for Applications or RFA for the Ohio Integrated Care Delivery System or ICDS, which comprehensively manages Medicare and Medicaid benefits for the dual eligible beneficiaries in that state. The ICDS program will be implemented in select regions across the state starting in January of 2013 and covers nearly 115,000 beneficiaries.
In this pilot, the Ohio Department of Jobs and Family Services will select health plans for each of the 7 regions in the state through a competitive application process that will be due on May 25. Notification of scoring results is tentatively scheduled for June 18.
It is important to mention that the Ohio dual eligible opportunity is not restricted to health plans holding Ohio Medicaid contracts. Therefore, regardless of the outcome of our outstanding protests related to Ohio's Medicaid contract award, Molina Healthcare would not be excluded as an eligible applicant for the Ohio ICDS.
Instead, the application requirement as outlined in the RFA requires that if the applicant does not offer Medicaid Managed Care services in the state, then it must currently serve at least 100,000 lives across all lines of business in all states. The requirements also identify that an applicant must currently maintain a CMS-approved Medicare Advantage plan.
As evidenced by the growth in dual eligible opportunities in our field and the proposed expansion of Medicaid in the coming years, federal and state governments now recognize that individuals receiving care in a -- on a fee-for-service basis through government programs are ideal candidates for Managed Care. As these opportunities in the government healthcare sector continue to grow increasingly attractive, we can expect the competition in our industry will intensify.
Our recent challenges with the contract award in Ohio and Missouri are byproducts of a highly competitive industry. On a level playing field, we welcome the competition.
The dual eligible growth opportunity is an attractive one. However, serving the healthcare needs of these complex patients is not for every company, and it takes more than just experience with Medicare to be successful.
We believe we are uniquely positioned to take advantage of this growth opportunity. Our operation of dual eligible Special Need Plans since 2006, our participation in the acclaimed Washington Medicaid Integration Partnership for the ABDs since 2005 and our growing understanding of long-term care with the Texas STAR+ program have honed our skills in serving complex patients.
Our experience with these patients combined with our 32-year history of arranging for the healthcare needs of low-income Medicaid patients makes the expansion of Managed Care to the dual eligible beneficiaries a natural extension of our business. In summary, despite the issues associated with the Ohio contract awards, which we are pursuing in our appeal, this is a good first quarter operationally and a strong start to 2012 for Molina Healthcare.
The performance at our established health plans was excellent, and our recent wins in California, Texas and Washington combined with the near-term activity surrounding the dual eligible population continue to strengthen our growth profile. As always, we remain focused on diversification among our 3 lines of business: Health plans, our clinics and our fiscal agents.
Not only does diversification drive growth, it also helps mitigate risk with regard to our revenue stream. Our industry is one that is witnessing a considerable amount of growth.
While identifying growth opportunities is central to our business, we remain equally committed to operating our core business. We undoubtedly have more work to do, but we're excited about 2012 and remain confident, as ever, in the future potential of Molina Healthcare.
I would now like to turn the call over to John, our CFO, to discuss our first quarter financial results in more detail.
John C. Molina
Thank you, Mario. Good afternoon, everyone.
Our financial performance this quarter provides a good start towards achieving our 2012 guidance. As Mario pointed out, improved premium revenues and enrollment were the hallmarks of the quarter.
Profitability metrics such as earnings per share, operating income and, more importantly, EBITDA, all experienced modest year-over-year improvements despite a continued weak premium rate environment and higher costs associated with assimilating new populations. Earnings per share for the quarter were $0.39, up 3% from a year ago, while net income increased to $18 million or 4% over the previous years.
EBITDA also increased by nearly 5% over the first quarter of 2011. Higher margin at the company's Molina Medicaid Solutions segment and higher revenues in the health plan segment contributed to these improvements.
At the end of the quarter, our enrollment stood at 1.8 million members, with the bulk of the sequential enrollment gains coming from Texas, where the company began serving new STAR and STAR+ members in the Dallas, El Paso and Rio Grande Valley service areas effective March 1. Our Medicare plans grew by 7,100 or approximately 29% year-over-year.
As a reminder, nearly 80% of our Medicare enrollment is in our Special Needs Plan. Marketing and outreach to this population is particularly challenging, as potential enrollees must be contacted one at a time, and many of them often have low education and literacy levels.
Despite these challenges, we continued to consistently increase our SNP enrollment while gaining important experience in caring for this population. Consolidated premium revenue grew 23% to $1.3 billion in the first quarter of 2012 compared to the same period last year due to a 7% increase in membership and a 15% increase in per-member per-month revenue due to mix shift.
As Mario mentioned, the California plan added approximately 23,000 new ABD members since the first quarter of 2011, with the majority of these members joining in the plan in the last 9 months. Texas, on the other hand, added approximately 58,000 ABD members since the first quarter of 2011, with the majority of these new members joining the plan in March 2012.
ABD members have higher per-member per-month premium revenues. The shift in our member mix is evident by the fact that 15% of the company's current enrollment is comprised of ABD members and Medicare members compared with just 11% of membership a year ago.
Our consolidated medical care ratio increased to 85.2% in the 3 months ended March 31, 2012, compared with 84.5% in the same period last year. While the ABD members we have added in California and Texas have come with higher premiums, medical care costs are also higher for these members.
Additionally, rate decreases of approximately 2% in Ohio, effective January 1, 2012, and approximately 3% in California, effective July 1, 2011, also contributed to a year-over-year increase in the medical care ratio. Many of our legacy health plans were able to achieve a higher medical margin in this quarter when compared to the first quarter of 2011.
Despite the shift in member mix in Texas, the medical care ratio at our Texas health plan actually decreased both year-over-year and sequentially to 90.8%. This is consistent with the expectations for Texas that we outlined at our Investor Day, which assumed that the performance of our existing book of business would improve with longer tenure.
Also as we expected, the higher medical costs associated with new populations will be partially offset by rate increases associated with the health plans assumptions of in-patient and pharmacy risk for all existing populations. As a reminder, our guidance assumes a medical care ratio for the Texas health plan at 90% for all of 2012.
I want to remind everyone, however, that we've only had one month of experience in the new Texas regions and with the new pharmacy and in-patient benefits. In estimating expenses and setting claims reserves for the first quarter, we had to rely heavily upon historical data provided by the state's Medicaid agency in place of our own claims payment experience, which is almost nonexistent for the new regions and benefits.
Performance at our MMS subsidiary improved in the first quarter due to the achievement of systems certification in Maine that had previously delayed revenue recognition, more effective cost controls, progress towards system stabilization in Idaho and Maine and lower purchase price amortization. General and administrative expenses for the quarter increased to 8.8% of total revenue compared with 8.4% of total revenue for the same quarter last year.
The company incurred additional expenses in the first quarter of this year due to investment in administrative infrastructure in anticipation of opportunities in Texas and amongst the dual eligible population. Although there has been considerable amount of Medicaid RFP activity in the last 12 to 18 months, we remain very selective in our participation and mindful in the use of our resources.
Cash flow provided by operating activities was $51 million for the first quarter of 2012, nearly 3x net income. The company had cash and investments of about $930 million, and the parent company had cash and investments of $40 million.
Days and claims payable increased sequentially to 44 days. The increase was primarily driven by the establishment of higher reserves in connection with our Texas expansion, which was effective March 1.
I want everyone to remember, though, that we calculate our days and claims payable on a rolling 12-month basis. That means that cost -- claims cost per day will continue to grow each month over the next 11 months as incremental medical costs associated with the Texas expansion are rolled into the calculation.
Our claims payable liability, however, will likely remain the same or even shrink as the payment of claims begins to offset the increase that we have seen in our claims reserves this quarter. As a result, the numerator in our DCP calculation, our claims liability, will be more or less constant, while the divisor, claims cost per day, rises over the next 11 months.
Therefore, the expected result would be a decrease in our DCP over the next 11 months, all else being equal. The distortion of our DCP resulting from a substantial increase in membership in March illustrates one of the many weaknesses of the DCP calculation that we've spoken of in the past.
We've always believed that a better measure of the adequacy of our claims reserves is to look back to the claims liabilities that we have previously reported, with the benefit of the hindsight we gained as we pay out claims over time. The roll-forward table we presented at the end of today's earnings release provides a good example.
As you can see, that table shows favorable development of our claims reserves was almost $37 million for the first quarter. The comparable number from last year was $44 million.
Unfavorable prior-period development in Missouri of nearly $5 million this quarter was the main reason for the decrease in prior-period development quarter-over-quarter. We present this claims liability roll-forward table every quarter, and if you go back and review our prior reports, you will see that we've had a consistent record of maintaining adequate reserves.
I will be talking more about this on future calls. In summary, we are pleased with the results of the first quarter and confident about our EPS guidance of $1.75 for the year, ended December 31, 2012.
This concludes our prepared remarks. We are now ready to take questions.
Operator
[Operator Instructions] And our first question comes from the line of Josh Raskin with Barclays.
Joshua R. Raskin - Barclays Capital, Research Division
I hate to do it, but I want to start in Ohio. I calculate the MLR somewhere just under 87.5, excluding premium taxes.
So that's about almost 200 basis points above your overall, again, excluding premium taxes. So is it fair to assume that Ohio was less profitable than your overall book of business in terms of a percentage margin?
Or are you expecting sort of improvements in that MLR as the year goes by and you fully anniversary the Rx?
John C. Molina
Josh, this is John. We don't talk about profitability on a state-by-state basis.
Also with the -- removing the premium tax and then adding the pharmacy benefit in, it just gets kind of crazy. At this point, as Mario said, the potential loss of the Ohio contract is not going to impact 2012 guidance.
We haven't made 2013 guidance, so we don't want to speculate. And frankly, we'd rather be hopeful that we're going to retrain that contract.
Joshua R. Raskin - Barclays Capital, Research Division
I guess, John -- I certainly appreciate that, but I guess we're talking about sort of a one-off situation here where you're previously largest state could be disappearing. I think it's pretty important to figure out the impact that, that could have.
So at some point during the year, do you plan on quantifying that? Is that post-finding out about your appeal?
John C. Molina
Yes. We'd like to wait and see what happens with the appeal, Josh.
Although you're correct to point out the difference in the cost, and part of that has to do with the implementation of the pharmacy benefits.
Joshua R. Raskin - Barclays Capital, Research Division
Right, right. I didn't know if that was normalized for the year or that just got added in October.
Let's move on, I guess -- I'm sorry, I don't want to take waste time with that. The cash flow, I think you mentioned in the press release there were some timing-related issues.
So I'm just curious, is there a quantification of how much benefit you saw from, I would guess, early payments from government partners?
Joseph W. White
Josh, it's Joe speaking. If you look at the cash flow statement, you can see, actually, that deferred revenue was less of a source of cash this time out than a quarter ago.
First quarter of 2011, Ohio paid us early. That didn't happen this year.
So if you want to look at other than net income and amortization, depreciation, the big factor is driving cash flow this year in a favorable sense for the increase in claims payable offset by less deferred revenue and also an increase in receivables tied to what's happening in California, where California has delayed, has essentially slipped via move-back their payment of premiums 1 month on a sliding basis.
Joshua R. Raskin - Barclays Capital, Research Division
And Joe, that $44.5 million that -- is that a fair number to use? I mean, I think there's usually a lot of moving parts in there.
So I'm trying to figure out next quarter when it reverses how much of that -- how much of April was paid in March?
Joseph W. White
I would think that, that -- generally somebody always pays a day early. So I think it could carry forward that $44.5 million.
I wouldn't necessarily expect it to all reverse.
Joshua R. Raskin - Barclays Capital, Research Division
Okay. And then, I'm sorry, last question on the...
Joseph Mario Molina
Somebody will always pay a little bit early.
Joshua R. Raskin - Barclays Capital, Research Division
Sure. And John, I apologize, last question.
Did you mention a slight unfavorable development in Missouri? And I was just curious what that was related to, if there's any expectation of that continuing?
John C. Molina
Josh, slight, it was $5 million. Part of that was due to one of our members had quintuplets, I believe, late last year, and we are still paying for those costs ongoing this year.
Operator
Our next question comes from the line of Charles Boorady from Crédit Suisse.
Charles Andrew Boorady - Crédit Suisse AG, Research Division
First question on Ohio. You mentioned the medical care margin decreased, and part of that was because of the higher loss ratio, the pharmacy carve-in.
But if we look at dollar profits, is the dollar profitability of Ohio up or down year-over-year?
Joseph Mario Molina
Joe, do you know?
Joseph W. White
Charles, I'd have to check that. I know that obviously the MCR is up 180 basis points for the pharmacy, and then they took a 2% premium cut January 1.
We'd have to just do the math on the back where we present our medical margins. Honestly, I don't have that number handy, but I think you can work it from the table in the back of the ER.
Charles Andrew Boorady - Crédit Suisse AG, Research Division
Okay. The pharmacy carve-in.
Was that net additive to the dollar profitability, or was that a neutral?
John C. Molina
It's net additive. Again, it's generating a -- it's -- I think it's generating an MCR in the high 80s, so it's net additive.
Charles Andrew Boorady - Crédit Suisse AG, Research Division
Okay, got it. And then at your Investor Day, you gave a really helpful slide with the excess -- I think it was the capital by state.
Ohio looked like it had a decent amount of excess capital. Does that picture look pretty consistent today with where it was at your Investor Day?
And how should we think about that capital in the event of hypothetically, you're out of Ohio next year. Is that all excess cash that can be dividend in directly to the parent in January of 2013?
John C. Molina
We've got about -- at March 31, we've got about $120 million of total capital in Ohio. That's everything, that's not just excess.
About $120 million of total, $80 million of excess. In the hypothetical situation that we were to exit Ohio, which obviously means that the failure of our appeal and the inability to get a dual eligible contract there, anything like that, we would start withdrawing that money, I think, in the first half of 2012, not all of it, but -- I mean 2013.
Not all of it, but we'd start that process. That's a lot of hypotheticals there, though.
Charles Andrew Boorady - Crédit Suisse AG, Research Division
Yes. No, but I appreciate that.
And then Texas, final question, just Texas in the first quarter, about how much of your expenses there were due to startup costs? And of course, what would the quarter have looked like without the new Texas RFP had that never occurred?
Joseph W. White
If you wanted to look at -- it's Joe speaking, if you want to look at Texas costs and admin-related costs that we incurred without any related revenue, that ran about $2 million for the quarter. There's obviously additional costs at the parent, and that's a little bit harder to nail down, but if you want to drop something in your model, I'd figure another $0.5 million to $1 million at the parent.
Charles Andrew Boorady - Crédit Suisse AG, Research Division
Got it. And it's...
Joseph W. White
It's somewhere between about $2 million and $3 million, total.
Charles Andrew Boorady - Crédit Suisse AG, Research Division
Got it. Just to make sure I understand the days claims payable explanation correctly, we think about new lives coming in.
And isn't it right that the new revenues come in well before expenses are actually paid for? So should -- is there a case to be made for an increasing days claims payable with growing enrollment?
Or are you paying providers so quickly that, that doesn't actually happen?
John C. Molina
Charles, the enrollment has come in now. The large enrollment growth in Texas is largely over.
And that's where we saw the run-up in the DCPs. There will be slight increases throughout the year, but nothing like what we had in March.
So exactly what you talked about is going to happen. We had to build up an enrollment.
Now, as we start paying the claims and getting a better track record, as we describe in the script, the denominator will go up, the numerator will go down slightly.
Charles Andrew Boorady - Crédit Suisse AG, Research Division
I got it, I got it. So you're referring to the other end of that curve.
Okay, very clear.
Operator
Our next question comes from the line of Carl McDonald with Citigroup.
Carl R. McDonald - Citigroup Inc, Research Division
On the Los Angeles dual announcement, I'd be interested if you have a way of thinking at this point about how much of the enrollment HealthNet's likely to get in Los Angeles? I mean, how many duals will stay fee-for-service versus how many HealthNet will pick up?
And then how you think about what percent of that will that get subcontracted out to you.
Joseph Mario Molina
This is Mario. It's a little bit difficult to say.
We have a contract with HealthNet that specifies a certain percentage of the market share will be defaulted to us. And we expect it to be along the lines that the contract has used in the past.
The problem, however, is we don't know what the duals enrollment will look like, because it is an opt-out. So we don't know what percentage of patients will opt out, and we're just going to have to wait and see.
Carl R. McDonald - Citigroup Inc, Research Division
Got it, okay. And then follow-up question on California, if you could just give us an update on where the legislature is in terms of the trailer bill that would extend from 4 counties to 10?
Joseph Mario Molina
That's a really good question. I don't know.
We don't have the May revise of the budget yet. But I would expect that the budget is probably going to come in, in worse shape than we thought, that revenues are going to be weaker than anticipated and we'll put more pressure on the state to try to save money.
One of the biggest costs the state of California has is the Medicaid program, and the biggest component they can do something about are the duals. I mean, they represent 15% of the patients and 40% of the costs.
So I would expect that the state would have a good reason to accelerate the move of the duals into managed care.
Operator
Our next question comes from the line of Tom Carroll with Stifel.
Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division
I want to continue the line of questioning on the duals a bit here. And I'm wondering just as this opportunity continues to evolve, if we can start to get some more details, not just on California, but other places well.
But let's start with California for now. What rate will Molina be paid when this gets implemented?
And then, secondly, how will Molina operationally staff up to meet what will likely be a sizable outreach effort, if you will, on potentially thousands of chronically ill people? Those are the 2 things I want you to talk about.
John C. Molina
And so, Tom, let me take -- this is John. Let me take the first part of your question, and I'll let Terry handle the second part.
Frankly, we don't know what the rates are going to be, because we don't know the full expanse of the benefits that the state's looking to put in nor how it's going to be coordinated with the Medicare piece. So at this point, it would just be a conjecture.
And as you know, we don't like to do that.
Terry P. Bayer
And this is Terry to add a comment on the staffing. We have a model of care that we have scoped out for care of the population.
So there are investments we're making now in the tools and the training and the system changes that have to be made and doing some preliminary planning on staffing. We're working with a range of estimates on the number of beneficiaries that will ultimately be enrolled, and as the months go on and we have more information, we will staff toward that.
But certainly, we are putting in place supervisory and managerial positions so that we're ready to hire the frontline staff as we know how many.
Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division
So obviously, a big opportunity, perhaps. But I guess I struggle with a big program that we don't know what the price tag is on yet that will be focused on a lot of chronically ill people that have never been in managed care before.
I guess internally, how do you think of this as an opportunity?
John C. Molina
We think about it as an opportunity, Tom, over the long haul. So there are certain things...
Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division
So long term [indiscernible]?
John C. Molina
Absolutely. Over time, we believe that our systems of care will allow us to lower the medical costs associated with these patients as compared to what they've experienced in fee-for-service.
There is going to be a ramp-up, you're absolutely right, if that's what you're implying, in that we will manage it just as we have managed very large-scale implementations in places like Ohio and Texas before. But if people expect that on day one, it's going to be turning a profit that's equal to what we've done in the past, it's probably unrealistic.
Joseph Mario Molina
Yes, Tom, this is Mario. If you look at when we've brought new populations in, in the past, we have seen some pent-up demand.
I think we're seeing that now with the new patients in California and Texas, the SPDs and the ABDs, and I would expect to see something along those lines with the dual eligible beneficiaries as well.
Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division
Have you had a chance to maybe compare/contrast the California versus the Texas proposals? I know it's -- they're brand-new, but any commentary one versus the other?
Joseph Mario Molina
Well, I don't know about comparing California with Texas, but we have been able to compare California ABDs -- the new ABDs versus ABDs that have been on the plan, and the new ones are running us a slightly higher costs. So there is some evidence for some pent-up demand.
It's consistent with what we've seen in the past.
Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division
All right. And then one other -- just one other quick one, looks like MMS added nicely in the quarter.
How should we think about EPS contribution from this business of yours? I mean, it looks about -- what, $0.10 a share in the quarter?
John C. Molina
Well, the problem with MMS is that it has been sort of up and down. And we haven't reached, I don't think, a consistent run rate yet.
So it's a little bit difficult to say. Things are definitely improving.
I think the fact that we got certification from Maine was a big landmark. We have had the site survey for Maine back in December -- I'm sorry, for Idaho back in December, and we're just awaiting certification.
But we don't see any reason why that system shouldn't be certified as well, because it's essentially the same system that we had in Maine. And once we get the certification of both systems, I think things will stabilize, and we'll get more consistent earnings.
Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division
Is my math right there, though? I mean, is it that simple as just looking at like $0.10 a share?
Joseph W. White
Yes. It's Joe speaking -- that's correct.
You can assume about 750k pretax in the penny [ph].
Operator
[Operator Instructions] And our next question comes from the line of Chris Rigg with Susquehanna.
Christian Rigg - Susquehanna Financial Group, LLLP, Research Division
Is it possible to sort of spike out or isolate what the Texas MLR would have been on sort of a legacy basis? And then more importantly, give us a sense for what the Texas MLR will do sequentially on both sort of 2Q MLR versus Q1 as well as the year-to-year comparison, just given the enrollment didn't come on until March?
John C. Molina
Chris, this is John. We did not go back and try to reconstruct what it would've been absent the new populations and absent the benefits.
So the answer to your first question is no. We would expect that we will see progression, positive progression with the medical costs going down over the year.
I don't know if we're going to see much of that, frankly, in the second quarter. We've got a brand-new population, we've got to go out and assess that, get folks in care management, et cetera, and it may be just too soon after the enrollment to see much of a decrease.
Joseph Mario Molina
Having -- this is Mario. Having said that, remember we guided to a 90% MLR in Texas.
Christian Rigg - Susquehanna Financial Group, LLLP, Research Division
Right, right. Now -- and that's trying what I'm trying to get a sense for, what sort of the sequential trend will be there, but if you don't have it, you don't have it.
I guess the other thing is similar on the G&A side, can you give us a sense for the progression there? And can you remind us what you're targeting for the year?
Joseph Mario Molina
Joe will pull up what we're targeting for the year, I think. In terms of progression, we should see some improvement in the admin, because we had the admin buildup in the first quarter without the revenue associated with it in -- with Texas, but then you're also going to get a little bit of headwinds because if, in fact, our Missouri appeal is not upheld, then we'll lose that revenue in the back half of the year.
Joe, you have that, what we talked about?
Joseph W. White
Yes. We've guided to 7.8%, which is pretty much consistent with where we expect to end up now.
Remember that in addition to the incremental admin expense related to the Texas startup in the first quarter, we also only had one month of revenue, the incremental revenue in Texas.
Operator
Our next question comes from the line of David Windley with Jefferies.
David H. Windley - Jefferies & Company, Inc., Research Division
A couple of small ones, I think. So you mentioned the family of quintuplets.
Was that the singular premature birth issue? Or was it broader in Missouri, the comments that you made there?
John C. Molina
That was the majority of the $5 million, not all of it, but that was the majority.
David H. Windley - Jefferies & Company, Inc., Research Division
And $5 million was the number. I missed that before.
And then in Wisconsin, it looks like the MLR in 1Q ticked back up from what you were seeing the last few quarters prior to this one. Wondered if you could comment on what was going on there and if you expect that to trend back down again.
John C. Molina
Wisconsin is still a relatively small plan, so it's going get hit with some fluctuations, still. If you look at year-over-year, don't look at the MLR for a second.
If you look at the medical costs year-over-year, we brought those down $30 PMPM. And one of the of the big challenges we've had in Wisconsin is the rate issue.
We've gotten, I think, 2 significant rate cuts in 2 years. So if we can maintain the medical care costs, maybe bring them down a little bit more but really work the battle on the revenue side, I think Wisconsin will right itself.
David H. Windley - Jefferies & Company, Inc., Research Division
And maybe one last question. So you've mentioned both of your appeal protests, Ohio and Missouri.
Can you comment to us about what your timing expectations are around hearing updates from the states on those 2?
Joseph Mario Molina
Well, the court case was heard by the judge in Missouri last week, and we're hoping for a decision somewhere around, perhaps, May 10. So that's probably the next bit of information we'll have out of Missouri.
In terms of the appeal in Ohio, perhaps later this week. We don't really know.
Operator
Our next question comes from the line of Melissa McGinnis with Morgan Stanley.
Melissa McGinnis - Morgan Stanley, Research Division
Can you just provide us an update, kind of setting startup markets aside, about what you're seeing from a cost trend perspective, with particular focus on utilization trends, maybe by category? And then more broadly, maybe just remind us what factored into your 2012 outlook for medical cost trends, sort of in your same-store book or the non-startup market?
John C. Molina
Okay. We're talking 10 different health plans.
What I would say is the medical costs for our more stable plans appears to be flat. However, that doesn't necessarily translate into lower MCR across the board, because we do have rate pressures, as we talked about, in Ohio, California, with the new Washington contract, I believe there's a slight dip in the Washington revenue.
But in places like Michigan, New Mexico, Utah, those are -- our utilization is pretty flat. Even in California for the non-SPD population, the more the legacy or more mature population, the tenant [ph] population, it's been fairly flat.
I think that we guided to an overall MCR of 85? 85, Joe?
Joseph W. White
86 so far.
John C. Molina
86. And that was sort of a combination of the higher medical costs and -- with the new populations like Texas and the California SPD.
And really, we didn't book or didn't anticipate much improvement, even in the more mature plans. But we didn't anticipate much deterioration either.
Melissa McGinnis - Morgan Stanley, Research Division
Okay, so no real deterioration in kind of mature MLRs, even though I think you have assumed flat to negative rate increases across the board in every market?
John C. Molina
That's right.
Melissa McGinnis - Morgan Stanley, Research Division
Do you assume just that you can offset cost pressures with medical management techniques?
John C. Molina
Well, there are 2 things. One is we are aggressively pursuing medical management opportunities, and the second is while we anticipated no rate increases, we're also not anticipating that the states are going to increase their Medicaid fee schedules.
So really, if utilization is flat and there's not increased medical or Medicaid fee schedule increases, overall, I'm sure it should be basically flat.
Melissa McGinnis - Morgan Stanley, Research Division
Okay, great. And then I guess switching focus.
In the event that you do leave Ohio next year, how fast can we think about you sort of shutting down that health plan to sort of get rid of the SG&A cost there? And is that even really the right way to think about it, because is there some opportunity to maybe redeploy some of the corporate overhead that may be supported by that market towards some of your newer opportunities, such as the California duals?
Joseph Mario Molina
Well, this is Mario. There are a couple of things.
We do have the RFP -- or RFA for the duals coming up, and if we get that, then much of the staff there is going to be retained for that contract. Also, some of the people in Ohio are working on other state projects, so we do have some regional people there as well.
So it's not as if everyone in Ohio is only working on Ohio projects and if that Ohio Medicaid contract goes away that there's no need for them. So there's a little bit of overlap.
So there will be -- if we were to not prevail in the appeal and if we were not to get the contract for the duals, then we would have to decrease the staff and decrease the SG&A. But it would be a gradual process.
We still have the claims run-out that we're going to have to do, and that'll take a year. So there are going to be SG&A costs associated with that.
Now some of that is built into the reserves when we're doing our reserving. We'll wind it down as quickly as we can, but it won't go away completely.
Operator
Our final question comes from the line of Sarah James with Wedbush.
Sarah James - Wedbush Securities Inc., Research Division
So just thinking about the dual RFA that came out for Ohio. I noticed that there were some changes to how the state had set it up for the regular TANF CHIP contract and that you were able in the dual RFA to use -- even if you were in the state, you could use an additional state's data for clinical performance or care coordination.
And that's different from how it was in that TANF CHIP contracting. So I'm wondering is it reading too much into that difference to see maybe the state learned something from the first experience and improved it in the second?
Or is it -- should I just be thinking about it as 2 different sets of people going down 2 different paths with really no correlation between the 2?
Joseph Mario Molina
Sarah, this is Mario. I think that the lesson learned from all this is that each RFA is unique and different.
And it's very difficult to translate your experience from one to the next. I think it's difficult to translate the questions from one RFA to the next.
They may have been assembled by different people, they may have different goals. You just have to take each one individually.
Sarah James - Wedbush Securities Inc., Research Division
Got it, okay. And then lastly, on the MMS business.
If you guys could just give us an update on where you are as far as the latest certification processes go and, seeing that Maine got full certification in December, if there's been any discussions around maybe upselling services there?
Joseph Mario Molina
Yes. This is Mario, again.
I think it's a little early to talk about upsales in Maine. And as far as Idaho goes, the site visit was in December, and the paperwork is back at CMS.
We don't anticipate any problems with that certification. We just don't know exactly when it's going to come through.
But I wouldn't take this as a bad sign. This is not -- it often takes 6 months before a plan gets certification after the site visit.
So this is not unusual. Okay.
Well, thank you, everyone, for joining us, and we will see you next quarter.
Operator
Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines.