Dr. J. Mario Molina

Titles: Chairman and Chief Executive
Company: Molina Healthcare Inc.
Born: 1958, Long Beach
Education: B.S., chemistry, California State University, Long Beach; M.D., USC Keck School of Medicine, 1996; residency at Johns Hopkins Hospital in Maryland
Career Turning Points: Deciding to abandon an academic career to work for this father's company
Most Influential People: His father, Dr. C. David Molina; Dr. Loren Lipson, a USC professor who encouraged him to think big
Personal: Married to Therese Molina for 18 years; one son and two daughters
Hobbies: Collects antique medical texts, grows orchids

J. Mario Molina, Molina Healthcare Inc. chief executive, was named one of nation's most influential Hispanics by Time magazine in 2005, and Ernst & Young awarded him Greater Los Angeles Entrepreneur of the Year honors in 2002. But Molina considers himself less an entrepreneur and more a steward of his father's legacy, which began in 1980 when Dr. C. David Molina opened his first Long Beach health clinic catering to low-income patients for whom English is usually a second language. Taking the helm after his father's death in 1996, Molina guided Molina Healthcare, the state's second largest MediCal health maintenance organization, to a successful IPO that enabled the company to expand its model to several other states. Though a $946 million public company with a majority independent board, Molina Healthcare still has a family-run feel: chief financial officer is Mario Molina's younger brother, David Molina. Their sister, Dr. Martha Bernadett, serves as vice president for research and development. While Molina, by training an endocrinologist, hasn't seen patients since more than a decade, he keeps his medical license current and collects vintage medical texts in his spare time. He's also a local community leader, serving as board co-chair of Aquarium of the Pacific, which he can see from his offices in downtown Long Beach's Arco Tower. This year, he's also president of the Long Beach Chamber of Commerce.

Question: You talk about the strong influence your father had on you, how you'd go to the hospital to watch him work. Was there ever a question of you not becoming a doctor yourself?

Answer: That's a funny question. In the 10th grade we had this class where we were asked to write an essay about what we wanted to be and I wrote about wanting to be a doctor. My career guidance counselor gave me a D, wrote in red pen "hopelessly unrealistic." I remember being kind of shocked. So after that, I kind of kept it to myself.

Q: So you always wanted to be a doctor?
A: Actually before that I wanted to be a baseball player. I thought I would make a great first baseman.

Q: Were you any good at baseball?
A: I was awful. Now that would've been even more unrealistic.

Q: Did you intend to become an internist like your father?
A: I became interested in endocrinology while I was in medical school, through a summer job I had. There was a stipend program where you had to talk someone into giving you the job. Dr. Loren Lipson was this character whose office was in the basement of the old TB hospital. He was doing some interesting work in diabetes. Well, Loren tries to do everything he can to talk me out of this, but finally tells me to come back in a week if I was still interested and he'd help me fill out the application for the stipend.

Q: Why did he discourage you?
A: For the same reason my father initially discouraged me from becoming a doctor. They both wanted to make sure I really wanted to do this. If they had made it too easy I might have gone into medicine for the wrong reasons. But I began studying diabetes with Loren, and that's was what I though I was going to do for the rest of my career.

Q: Why diabetes?
A: Diabetes is a very interesting disease. It leads to a lot of other complications for people but we really don't understand it very well. I like physiology, biochemistry, I liked working in the lab. It was fun for me. So after my internship in Johns Hopkins and a fellowship in San Diego, I came back to USC in 1990 and got a position on the faculty. I thought someday I'd be a professor.

Q: What changed?
A: After I made the decision to become a doctor, my father always teased me about coming to work for him. All through school and even after coming back to USC, I'd work for my dad in the clinics or in the ER on the weekends. When the medical director at Molina suddenly died of cancer in April 1991, my dad offered me the position.

Q: That was a big turning point in your career?
A: There were a whole lot of coincidences that made me reassess what I really wanted to do. First, they condemned the building at USC where I was doing my research. I was coming to work one day, and they were removing the research animals on the order of the state Department of Agriculture, because they thought it was too dangerous for them to live there. So I'm thinking, the building's not safe for rats, but I'm supposed to work here. Finally the dean told everyone we have to vacate the building and find new lab space, immediately. I eventually found someone who would let me share their lab, but it wasn't a good situation. I started thinking, maybe somebody is giving me a message here, that this is not where I should be.

Q: Was the medical director position at Molina purely an administrative one?
A: At the time, the organization was still very small, so I'd work in the clinic on Saturdays, and pull the occasional shift at Pacific Hospital's emergency room just like I had been doing since medical school. As the organization grew, I guess I stopped seeing patients in probably 1994 or 1995. But I've always kept up my medical license.

Q: Why is that?
A: My dad said always maintain your license. You never know when you might need it. I agree. I'm a doctor, and I think it is always good to keep up with what is going on in the profession. And one day you never know where you might end up. Once upon a time, I thought I was going to spend the rest of my life in a laboratory killing rats.

Q: How did the first Molina clinics get started?
A: My father opened the first intensive care unit in Long Beach, at Pacific Hospital in 1962 and later he ran the emergency room there for more than 20 years. The genesis of the health clinics was that my father was seeing patients in the ER who really didn't belong in the emergency room. But they didn't have a regular doctor so they'd just drop in there. He told the hospital that we should just open some clinics, but they weren't interested, so he decided to do it himself. He opened his first clinic in 1980, and I worked there the summer before I went to medical school. He eventually had three clinics here.

Q: Why does Molina specialize in Medicare patients?
A: My father saw an opportunity because other people didn't want to take Medicare patients. And they still deserve the same kind of medical care, as everyone else. It's one of the basic values of the company.

Q: Why did Molina become a health plan?
A: The state of California decided that it would no longer contract directly with medical groups for MediCal (patients), but would contract with HMOs. You had to have $1 million in reserves to become licensed, and fortunately for us my father had always taken the money he had generated from the business and plowed it back in. We were one of the few medical groups doing MediCal that had the cash available to meet the state's requirement. You know doctors like to spend their money, buy fancy cars, own multiple homes, but my father wasn't that way. So we got our HMO contract in 1994.

Q: What led to the decision to expand the company out-of-state?
A: In 1996 a consultant friend of my father suggested it because we had been very successful in California and the question was whether it was about California or whether there was something about Medicaid patients generally that would make our model work in other states. Our hypothesis was that Medicare patients have similar problems whether they live in Kentucky, Utah or California.

Q: What led you to take the company public?
A: We were a family-owned company with no debt. We would just take the profits and plow them back into the company and when we built up enough cash we'd go out and make another acquisition. First, that's a very slow way to grow, because in the HMO business, as you grow, you have to increase your reserves, so your cash is tied up so. Second, because a number of other plans had gone into bankruptcy, no one would give us a loan. Bankers wouldn't talk to us.

Q: Do you ever regret that decision?
A: When we went public in, 2003, we had 511,000 members. Three years later, we had a million members. So it's been a very good decision for us. But yes there was a lot of skepticism in the beginning. We had to go out and convince people that we knew what we were doing.

Q: But how do you keep Wall Street happy with the margins, when Medicare reimbursement is so tight?
A: My father used to say, this is the business of nickels. You have to watch the small things little nickels add up to dollars. Here's one example. In the clinics, we would have to make photocopies of records and send them off to Medicare or other agencies. My father would notice that if you used a blue pen, it didn't copy very well so you wasted photocopies getting it legible. So my father, who I think was somewhat of a frustrated accountant, did some research and figured out the right pen to use to get the best copies at the lowest price here it is, a Uniball roller ball pen. So he made everyone in the company use that pen. That's the way this business is run, looking for the most cost-effective way of delivering the care.

Q: Health care reform is the big issue this year not only in California but around the country. How would you tackle the issue?
A: The biggest problem we have in this country is that we have not made good use of managed care. The only thing that has ever been shown to control costs is managed care. We got away from that in the '90s, when people started demanding more choice. But as the costs went up, employers decided it was getting too expensive for them.

Q: Public companies are under a lot of fire these days for not being more transparent and paying executives too much. How do you handle compensation issues?
A: My personal philosophy is to try to live on my salary ($775,000 base for 2006 and 2007) and put away most of my bonus for a rainy day. For the first 10 years that I was CEO I did not receive any compensation in the form of stock or stock options. John and I already were significant shareholders because this started as a family business, and we received stock from our parents, the founders. As a result, my economic incentive is always to do what is best for shareholders.

Q: Why do you collect antique medical books, and what is the oldest one you own?
A: The oldest is 400 years old. It's in Latin, but it has nice pictures because most medical books back then were anatomy texts. Most of my books are less than 100 years old and in English. It's not so much the age but the interesting things in them, such as being the first one to describe a particular medical condition. Or it's a matter of who owned them, like a famous physician.

Q: What other hobbies do you have?
A: Gardening, mostly orchids these days. When one is in bloom I bring it to the office. I don't vegetable garden any more because I don't have the time. Staking tomatoes and beans takes time, but with orchids you water them, put them in the right conditions, and they pretty much grow on their own.

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