Carve-Outs

Carveouts were driven by the need to rein in costs, assure consistent access, offer comprehensive service options and minimize bureaucracy. Employers over past ten years have carved out behavioral health, disease and pharmacy management and a range of specialty care areas.

Traditionally, “Carve Outs” are those health care services “carved out” of the capitation rate, i.e. paid at a different rate, such as:

  • Mental Health
  • Pharmacy
  • Dental
  • Visual
  • High Price services such as Transplant Services, burn unit services, etc.

One of the biggest concerns about carveouts is fragmenting the patient’s continuum of care.  A concern is who is responsible for continuum of carved out care for patient. Also, from the patient’s perspective, any fragmentation of care is magnified.  Another issue is confidentiality, especially in mental health.

Hospitalists (inpatient specialists) are an example of a carveout, claiming to offer efficiencies and cost savings based on their concentration solely on one are of care of reducing the time patients stay in hospitals.  

Hospitalists are “inpatient specialists” and they might be a carve out

Carveouts need a strong management infrastructure in place to negotiate and manage contracts and to be astute to find efficiencies and cost savings in how their physicians practice.  Also, carveouts need information system and strong physician leadership to succeed.

Where managed care penetration is high, carveouts seem to be disappearing.  For example all transplant procedures used to be carved out of the capitation payments received by a certain  member independent practice association (IPA) PCP group, but that has changed because transplants were so rare the insurance companies figured, based on actuarial data, the group could afford to pay for transplants out of its own capitation fees.  The restrictions on care to certain specialists is one of the reasons carveouts are failing.  Insurers are trying to expand, not limit, patient’s choice.

The use of payment by case rate may grow, according to Cross’s article, instead of per member per month rate.  Case rate uses set fees that cover certain diagnoses, such as using a set fee for bone marrow transplants, or using a set fee for the first year of care for a stage one or stage two breast cancer patient.

Concern with Carve Outs include:

  • Fragmenting Patient Care
  • Limiting Patient’s Choice
  • Confidentiality
  • Need strong management infrastructure in place to negotiate and manage contracts
  • Need information system
  • Need strong physician leadership
  • Groups may want to assume risk and not carve out services