Molina buys the data to grow its Medicaid business
The price looks cheap. The unit has annual sales of $110 million. That's less than a 25% premium on the sales figure.
But this is less about the processing and more about the data.
Molina provides health care under Medicare and Medicaid in nine states. The Unisys unit has data processing contracts in five states.
They're different states.
There is one small overlap. Unisys has a contract in Florida to provide Medicaid drug rebates. Molina has operations in Florida.
For Molina the deal is a stretch but a decent financial risk. The company estimated its net income for 2009 (a tough year by most accounts) at $29-33 million, on revenues of $3.7 billion. It will present its 2010 outlook on January 27 at the Parker Meridien Hotel in New York.
Molina CEO J. Mario Molina (above) was pretty clear on what he's up to in a Los Angeles Times interview. This gives the company credibility when bidding on contracts. It can compare its performance with what is being done in other states. (Picture from Hispanic Magazine.)
Molina is apparently not related to 1995 Nobel Prize winner Mario J. Molina, who won the chemistry prize for work in explaining the threat of CFCs to the ozone layer.
Molina himself is an interesting story. Starting with a single clinic his father started in Long Beach to treat the poor, he was named one of the nation's most influential Hispanic leaders by Time in 2005.
But this story is not about being Hispanic, or about Medicaid, it's about being successful by using data.
Medicaid and Medicare are considered hard businesses, because payments are low. Molina uses data processing to provide high levels of services at the lowest possible cost. He can make money on contracts that pay less per-patient than other providers. Think of him as health reform in action.
This does not mean Molina stints on data services. Far from it. Just last week the company signed a contract with Cisco to use its HealhPresence system to get care into more underserved areas. Many Molina facilities are staffed by nurses, but they're staffed 24 hours per day.
Molina is taking on 900 Unisys employees in this transaction, but the guess here is that the system he's inheriting needs some reinventing and updating in order to reach maximum efficiency.
That will take investment, but once the Unisys unit is absorbed Molina will have the best storehouse of Medicare and Medicaid best practices data in the country.
How much you want to bet he's taking calls from big-time IT executives this morning?