Carve outs: definition, experience, and choice among candidate conditions

Despite increasing discussion of carve outs as a device for controlling costs and improving quality of care, little systematic information exists on the effects of carve outs on cost, quality, and access to healthcare services. In the absence of such information, a conceptual framework is useful for deciding which conditions and populations may benefit from carve-out strategies, and how such arrangements should be designed. After carefully defining carve outs, and distinguishing them from other similar arrangements, this paper identifies five characteristics of a healthcare condition that increase the likelihood that a carve out's benefits will outweigh its drawbacks. The paper also examines the advantages and disadvantages of alternative approaches to structuring and administering carve-out arrangements, including how to pay for services, how to integrate them with mainstream care, provisions for consumer choice and provisions for carve-out accountability. The piece concludes that population carve outs, in which all the healthcare problems of a group of patients are managed by the carve-out organization, have inherent advantages, and identifies candidate conditions for population carve outs.