When Rick Hopfer joined Molina Healthcare as CIO in January of 2011, the company was on the cusp of breaking into the list of the largest US public companies with revenue at roughly $5 billion. Today, five years later, the company has surpassed $14 billion in revenue. Much of the growth has been thank to the Affordable Care Act, as Molina offers Medicaid-related solutions for low-income families and individuals, and assists government agencies in their administration of the Medicaid program.
When Hopfer joined, he was new to the industry, having spent the prior eight years at Sony Pictures Entertainment, most recently as CIO. He quickly developed a plan to help the company get on a footing for growth, setting a three year plan which included stabilizing, optimizing, and innovating business operations. We discussed that and more in this wide ranging conversation.
(To listen to an unabridged audio version of this interview, please visit this link.)
Peter High: You are the Chief Information Officer of Molina Healthcare, and I was wondering if you could take a moment to describe the business and your role in it.
Rick Hopfer: Molina Healthcare is a thirty-five-year-old Fortune 500 company based in Long Beach, California. Our mission is to provide quality health services to financially vulnerable families and individuals covered primarily by government programs. We have health plans, medical clinics, health information management solutions, and a presence in over thirty states serving about 4.2 million members. There is no other company that has that kind of a footprint and does all three of those. My responsibility at Molina is as the Chief Information Officer, responsible for all technology and security here at the company.
High: What are your strategic priorities as you look to the year ahead?
Hopfer: Molina has grown extremely rapidly, and it is primarily a result of the Affordable Care Act. My strategic priorities over the last five years have been to support Molina’s rapid growth effectively, efficiently, and securely through the use of technology. It has been a fun challenge over the last few years to support that kind of growth.
High: It is dramatic how fast the company has grown. It is an enviable sort of “problem” to have as CIO, nevertheless it does add a lot of complexity. How do you plan for such a dramatic change?
Hopfer: I joined the company five and a half years ago— before the Affordable Care Act had even been passed—but we needed to make sure we were prepared for that kind of growth. Starting in 2011, we put together a three-year planning process that looked at what investments do we need to make in our people and our processes and our technology. Three years ago, again, we were much smaller as a company, we put together a plan we called “MIT (Molina IT) Reform 2014” – tying 2014 to the Affordable Care Act. We have made significant investments since that point in time, and last year we put together our next three-year view, what we called “Biz Ops: Stabilize, Optimize and Innovate,” which is now focused on business outcomes. For us, it is constantly looking at what do we need to do and what are the competencies we need to have as an organization to make sure we can support the kind of growth that our business is going through. We do take a strategic look at the things that we need to do and the investments we need to make.
High: From an infrastructure perspective, have you mirrored some of the digital native companies in making a transition to the cloud and having a much more flexible infrastructure than perhaps some of your peer organizations of comparable size?
Hopfer: First, I had no healthcare industry experience five and a half years ago. Coming into this industry, I had a lot to learn. I had a group of executives that I partnered with, and then they said that the healthcare industry is changing so much that those who had been in it most of their careers were not exactly sure how it was going to shape up. They were helpful in helping me understand what we needed to do to be prepared for all of this growth—and from an innovation perspective partnered with that.
I would not say that we are an aggressive adopter of technology, but we are on the forefront of where we need to be as a company. We are looking at those companies that are disrupting industries, like an Uber might, and in healthcare there may be some companies coming up that we may want to keep an eye on. That said, we still wanted to make sure we leveraged the kinds of infrastructures that we would need, for example, whether it is converged infrastructure, and flash storage. One of those things we needed to do internally was to create our own private cloud initially and then look at how we can leverage public cloud because we are in insurance. The industry in general has been conservative into how we put information out into a public cloud because of PHI [protected health information] and other security measures. Obviously, it has been in the news over the last few years with various kinds of breaches. That said, we have a good plan, strategy, and policies in place that allow us to take a look at leveraging software as a service in the cloud, or leveraging cloud apps. So we are moving towards those more aggressive or disruptive technologies that other industries have jumped on. We are looking to see how we introduce those in a way that we can still securely manage the information that we have, but take advantage of those things with agility and in a cost effective way. We have balanced those plans well.
High: I know you are a believer in smart shoring and leveraging that as a tool to drive innovation. As an example of that, you set up an IT team in Albuquerque, as I understand it. Can you talk a bit about the rationale in smart shoring and the benefits that you have garnered from having done so?
Hopfer: Personally, I am not a big believer in the big outsourcing mills. I do not think that the benefits that those companies believe they are going to have by outsourcing their entire IT off shore are there. You need to strategic source, and you need to look smartly at what you want to source and what you want to keep internally. Because of our industry, and since our products are government programs- Medicare, Medicaid—we have a lot of requirements from the states about where we can do our work. Many of our health plans stipulate what can be done on shore or off shore. As a result of that, we do a lot more of our work on shore, although I do have some off shore partners where it makes sense. But we look at the things we need to be doing in the states, and, in some cases, specifically within states.
You mentioned New Mexico, which happens to be where we built our datacenter a few years ago. We selected New Mexico out of a number of locations, and one of those was because we have a health plan in New Mexico and we do try to employ Molina employees in the states where we have a presence. Albuquerque, New Mexico was a good location for us to establish a datacenter and, as a result of having a datacenter there, we looked at what kind of IT resources we can place there. But we also have IT resources in various positions, whether they be business relation management functions, help desk, desktop support type functions—we have people in all of the locations. Our service desk is an example. We are in multiple states. It is a virtual help desk which we can cover coast to coast and transfer those calls around as we need to. That may be more of the smart sourcing that you are talking about. We do a lot of that within the United States and Puerto Rico.
High: Can you speak about IT’s role in innovation, the collaboration that it requires across the enterprise, and whether or not there are specific people on your team that are tasked with that versus having it be a part-time duty for many people?
Hopfer: Molina has been an innovative company over the thirty-five years that it has been in existence, and not necessarily always as a technology innovator, but an innovator around business models, around the kinds of benefits and the way we serve our members. They have been innovative, but they have also looked at how we leverage technology where we can.
As a company, Molina has a research and innovation group that is headed up by Dr. Martha Bernadett, who happens to be a Molina sibling. She is a strong partner for IT, and her Research and Innovation (R&I) Group looks at business models and where technology can be applied to help. In partnership with that group, we look at things like mobility, or tele-health initiatives—new ways of leveraging the technology that can provide better care for our members. On a macro level, we have a good business partner and sponsor around technology innovation. Within the IT organization itself I have an Emerging Technology Group that is the engineering or technology arm of the R&I Group, and so in partnership we look at either developing or partnering externally on pilots that we may want to do a proof of concept on before bringing them in.
Another way I look at innovation is that innovation is all of our jobs. A few years ago within the IT organization we came up with an incubation program, and it is almost like having our own little VC company. Two or three times per year, the leadership of IT allows all of our employees to submit innovative ideas for which they seek funding. In funding I say “hours” because everything we do in IT, we track our hours. We take a certain number of hours for these initiatives. They have the idea submitted, they get voted on, then there are presentations for the top initiatives that are selected, and then for those we decide if we are going to invest in them. When we do, we look at what is it that they are trying to accomplish, and then they come back and show us what they have built, what the benefits are, what the ROI is. Many of those have led to projects that we have then gone to our business and submitted as innovative ways that IT can help them drive their business. We are on round three of our incubation program and it has been a successful way for our IT employees to be able to be innovative and get funding to go off and prove concepts, prove technology platforms, or process changes that are going to benefit the company.
High: You mentioned at the outset that one of your responsibilities is also security. I have spoken before about how one of the challenges that many modern CIOs have is balancing the need to innovate—actually having it as part of their purview, as you do—which is about risk taking, while also having security, which is about risk mitigation, as part of their responsibilities, and always holding those two in the balance. I wonder how you think about that balance. How does your team manage this so you do not have too much of a governor on those risks that are necessary in order to innovate, while also not going too far such that you could put the organization at risk?
Hopfer: As I mentioned, I did not have a lot of health care background before this. I have been in finance, retail, publishing. Prior to coming here, I was at Sony Pictures Entertainment. So I have had a lot of different industry background. Security in finance or investment banking is probably most similar to security in health care. When I first joined, the company had taken a conservative approach towards privacy and the use of technology. It was locked down. As an employee, you could not access anything outside of what we had internally on the network. Looking at how our workforce is changing and the industries are changing, early on I started working with legal, security, privacy to see how we come up with ways that will allow us to be a little more flexible with our employees, but also make sure we are still having that protection. Simple things we did five years ago were things like bring your own device, where our employees could leverage their own iPhones or Androids or even Blackberry at the time. That was fairly progressive, and it took a bit of time to get that through.
Since then, we have implemented technology like data loss protection, two-factor authentication; we have implemented technologies that have allowed us to be a little more open for our employees. We have a lot of good use cases where we want to leverage training that may be on YouTube or social media where our marketing folks would like to have a presence. We have looked at policies and technologies we can use to leverage those. But as a result of some of the larger breaches, whether they be the Anthems or the Sony Pictures, we have a board at our company, like many companies now, that is interested in what our security posture is here. We have a subcommittee of our board that meets twice a year to review both information technology and our security framework, our programs, our investments. It has been helpful having visibility at that level to make sure we are making the right investments on the security side—that we have the right frameworks in place, that we have the right people in place to provide as much protection as we can for our company, allowing us to start leveraging software as a service or cloud, where it makes sense. It is a bit of a balancing act, but having that kind of visibility and support has allowed us to build a good security group and program within the company.
High: You mentioned that you were new to healthcare a couple of times in the conversation. You were in financial services; you spent eight years at Sony Pictures prior to joining Molina Healthcare a bit more than five years ago. Having had multiple stops across a variety of significant industries, what sorts of universal principles have occurred to you that cut across all these industries versus those things that may be unique, industry by industry, or company by company?
Hopfer: There are folks who have an advantage of spending an entire career as CIOs in a specific industry and, as a result of that, they have extremely good knowledge about the business and industry. Then there are other CIOs who have experience as a CIO in multiple industries. Having that kind of exposure prior to coming here and being in small internet startup companies, being in Fortune 500 companies, in investment banking and publishing and entertainment, I did start to see that each one of these IT groups had a lot of the same characteristics. Everybody has to be able to do strategy and have some kind of governance program in place. IT spends a lot of money; we need to be fiscally responsible and have good fiscal management programs. HR, regardless of the industry, is about people and how you invest in people and provide career paths and partner with HR. You need to have good service planning and architecture, so we have enterprise architects and service management programs that you could forklift across industries. Infrastructure and operations are similar. You have to add on the nuances around security and risk management that may be more industry specific, but a lot of the methods and approaches and even technologies are the same regardless. When you get to the application side, you need to be able to run good projects, manage portfolios, and know how to either build or buy applications. This is where it is important to have business domain knowledge. At Molina, I happen to have a strong set of leaders and resources who are experts in what they are doing supporting our healthcare applications. Analytics, business intelligence: again, whatever the industry you are in, you need to have a strong foundation around data architecture, data quality, and data governance. Finally, knowing how to run and manage projects. Those characteristics are not unique to any industry. As long as you know how to build an organization and mature it, what that does is help create an organization that can partner with our business and insure that we are doing the best job we possibly can in delivering applications, whether we build or buy or partner in the cloud so we have secure processes in place.
High: You mentioned that the innovation group within your own team has a forward-looking emerging technology purview. In addition to all the forward looking that is necessary to think about innovations in healthcare, and changes in healthcare more generally speaking as well, I wonder if you could take a moment to talk about some of the trends that you are seeing that particularly excite you as you think say, three, five years out.
Hopfer: In our industry among others, everybody is looking at where social, mobile, analytics and cloud are going. Those are going to continue to evolve over the next few years. If you look at where Moore’s Law is and as it projects forward, our mobility devices are going to continue to get stronger. There is a lot that you may hear or read about in healthcare around DNA or genomics and how they are able to go through now and much more rapidly take a look at individual DNA. That will be changing.
Internet of Things: while it continues to be a concept over the next three to five years, we are going to see a lot more connectivity for us to be able to do monitoring for our members on a more real time basis. Maybe a few years from now Molina will have a suite of self-driving cars that picks members up and drops them off for their doctors’ appointments or even takes them to get the groceries they need. For the next three to five years, for all CIOs, looking at what these technologies are doing for us now that they are evolving is exciting. There has never been so much change going on. So I look at all of those: analytics, cloud, mobility. Those are things that are going to continue to evolve. The question is how we take advantage of that.
Peter High is President of Metis Strategy, a business and IT advisory firm.
This article was written by Peter High from Forbes and was legally licensed through the NewsCred publisher network.