Maximus details "period of pause" over U.S., U.K. political uncertainty

Some federal government services contractors have reported a slowdown in activity during the White House transition to a Donald Trump administration in their most recent earnings calls.

General Dynamics cited the change in administration as a factor that led to a first quarter revenue downturn in its information systems and technology segment. Leidos executives noted in their first quarter call Thursday “more slowness than (they) expected” on a lack of executive appointments along with the uncertainty over government funding that has led to extensions on current contract work and delays on new awards.

And then there is Maximus, the Reston, Va.-based company which derives much of its revenue from services to government health programs related to Obamacare. Maximus also supports a program in the United Kingdom to help determine benefits for those with disabilities or long-term illnesses.

This would show a company caught in two streams of political uncertainty: the potential repeal-and-replace of Obamacare and the U.K.’s effort to exit the European Union. CEO Rich Montoni all but confirmed that fact in the company’s second quarter earnings call Thursday and termed it a “period of pause” for the company in both the U.S. and U.K., as well as industry at-large.

Many of the company’s clients have effectively taken a pause on new initiatives to see what new programs and priorities may emerge, Montoni told analysts. “Not only here in the U.S. is it a weekly issue as it relates to the healthcare situation, it feels like it's even more frequent than a daily issue as we speak even today.”

House lawmakers advanced an Obamacare repeal bill in a narrow vote Thursday but the Senate has indicated they will write separate legislation instead of that from the lower chamber.

Montoni told analysts the company and health agency customers are “sitting (in) bated breath and preparing ourselves” for health legislation changes he said could result in government health programs under Obamacare becoming more state-based.

“And that's just an example of what we see in a pause situation,” Montoni said.

Also contributing to that pause is the process of filling key leadership positions at the Centers for Medicare and Medicaid Service, Maximus President Bruce Caswell indicated in the call.

Caswell told investors the Trump administration’s focuses on program efficiency and use of the private sector for some work could result into new legislation and regulation that would lead to procurement activity.

And any changes to health programs at the state level arising out of the repeal-and-replace effort would require industry’s help as those would have implications from 2020 onward, Caswell said.

The fifth year of open enrollment for the state health insurance exchanges “is just in front of us” so any revisions to legislation “really won’t be implemented until subsequent years,” according to Caswell.

“Clients recognize that a massive investment has been made in the infrastructure to support the basic business process of application, eligibility determination and enrollment for these individuals,” Caswell said to investors. “These are infrastructures that will be sustained over time. The basic problem and the need to get and keep people insured isn't going away.”

Caswell also leads the company’s estimated $1.3 billion global health services segment, the largest of its three reportable groups.

That segment generated slightly more than half of Maximus’ $2.4 billion in fiscal year 2016, according to the company’s last annual filing.

Maximus operates its fiscal year on an October-September basis in line with the federal government’s fiscal calendar.