Pricing of Common Cosmetic Surgery Procedures: Local Economic Factors Trump Supply and Demand

Special Topic Pricing of Common Cosmetic Surgery Procedures: Local Economic Factors Trump Supply and Demand Aesthetic Surgery Journal 2015, Vol 35(2) 218 224 2015 The American Society for Aesthetic Plastic Surgery, Inc. Reprints and permission: journals.permissions@oup.com DOI: 10.1093/asj/sju067 www.aestheticsurgeryjournal.com Clare Richardson, BS; Gennaya Mattison, BS; Adrienne Workman, BS; and Subhas Gupta, MD, CM, PhD, FACS, FRCSC Abstract Background: The pricing of cosmetic surgery procedures has long been thought to coincide with laws of basic economics, including the model of supply and demand. However, the highly variable prices of these procedures indicate that additional economic contributors are probable. Objectives: The authors sought to reassess the fit of cosmetic surgery costs to the model of supply and demand and to determine the driving forces behind the pricing of cosmetic surgery procedures. Methods: Ten plastic surgery practices were randomly selected from each of 15 US cities of various population sizes. Average prices of breast augmentation, mastopexy, abdominoplasty, blepharoplasty, and rhytidectomy in each city were compared with economic and demographic statistics. Results: The average price of cosmetic surgery procedures correlated substantially with population size (r = 0.767), cost-of-living index (r = 0.784), cost to own real estate (r = 0.714), and cost to rent real estate (r = 0.695) across the 15 US cities. Cosmetic surgery pricing also was found to correlate (albeit weakly) with household income (r = 0.436) and per capita income (r = 0.576). Virtually no correlations existed between pricing and the density of plastic surgeons (r = 0.185) or the average age of residents (r = 0.076). Conclusions: Results of this study demonstrate a correlation between costs of cosmetic surgery procedures and local economic factors. Cosmetic surgery pricing cannot be completely explained by the supply-and-demand model because no association was found between procedure cost and the density of plastic surgeons. Accepted for publication July 8, 2014. Although it is believed that healthcare in general does not conform to the laws of economics, plastic surgery appears to be an exception. 1 Cosmetic surgery procedures usually involve a fee-for-service policy with patients paying up front, allowing pricing to fit the traditional model of supply and demand. 2 Surgical cosmetic procedures constitute substantial proportions of many plastic surgeons incomes, with a quarter of surgeons in the United States claiming to dedicate their entire practice to cosmetic procedures. 3 An understanding of economic trends can enable optimization of pricing in plastic surgery practices. 2 Classic economic models postulate that supply and demand are interrelated and that both contribute to the pricing of goods. 2 When supply and demand are balanced, prices remain stable. If supply exceeds demand, prices decrease, and if demand exceeds supply, prices increase. 4 Results of numerous studies have demonstrated that cosmetic surgery procedures follow these basic rules. 1,3-8 Prior to the economic recession of 2007 to 2009 (commonly known as the Great Recession ), the volume of cosmetic surgery in the United States was predicted to increase exponentially and exceed 55 million procedures annually by 2015. 9 Although the economic crisis has undoubtedly affected this projection, cosmetic surgery still represents an area of significant consumer demand. According to the American Society for Aesthetic Plastic Surgery (ASAPS), 10 11.4 million cosmetic procedures (surgical and nonsurgical combined) were performed in the United States in 2013, From the Department of Plastic Surgery at Loma Linda University in Loma Linda, California. Corresponding Author: Dr Subhas Gupta, 11175 Campus St, CP 21126, Loma Linda, CA 92350, USA. E-mail: sgupta@llu.edu

Richardson et al 219 representing a 12% increase since 2012 and a 279% increase since 1997. Minimally invasive procedures represented a large portion of this statistic, increasing 521% since 1997. However, cosmetic surgery procedures are regaining popularity as the economy recovers, with 1.9 million surgeries performed in 2013, an increase of 6.5% from 2012. Despite the popularity of cosmetic procedures and their apparent conformity with the basic laws of economics, great variation exists across the United States regarding pricing of these procedures. In this study, we sought to determine the forces driving this variation and to reevaluate the fit of cosmetic surgery pricing to the model of supply and demand. Table 1. Population of Each Study, State Population in 2011 Salt Lake, UT 186,440 Boise, ID 205,671 Madison, WI 233,209 Cincinnati, OH 296,943 Pittsburgh, PA 305,704 Miami, FL 399,457 Omaha, NE 408,958 Kansas, MO 459,787 Albuquerque, NM 545,852 METHODS Fifteen US cities of various population sizes and distributed across the West, South, Midwest, and Northeast were selected for this study (Table 1). Cities of various population sizes were included within each region to assess the influence of population and patient demand on cosmetic surgery pricing. Four of the 15 cities (Los Angeles, Phoenix, Houston, and New York) had a population exceeding 1 million in 2011 and were included to represent areas of the highest potential consumer demand and were compared with less populous cities in the same regions. Practices in suburban communities were not included in this study. Ten surgical practices were selected from each of the 15 cities by means of the Find a Surgeon feature on the American Society of Plastic Surgeons (ASPS) website (www.plasticsurgery.org). This feature generates a random list of board-certified plastic surgeons in a city of interest. Although the ASAPS website also provides a comprehensive list of cosmetic surgeons, our search was conducted in the ASPS source to ensure that surgeons who perform both cosmetic and reconstructive services were not missed. Every third surgeon listed in the search results was included (until the maximum of 10 was reached) unless a search yielded 10 surgeons, in which case all of them were included. The cities with fewer than 10 surgeons or practices at the time of this study were Boise (n = 7), Albuquerque (n = 8), Madison (n = 9), and Omaha (n = 10). Five common cosmetic surgery procedures were selected for analysis: augmentation mammaplasty (with saline or silicone implants), mastopexy, abdominoplasty, blepharoplasty, and rhytidectomy. Rhinoplasty and liposuction were excluded because these procedures are associated with especially large variations in pricing. Specifically, body habitus, histories of trauma or prior procedures, and the patient s desired outcomes are key determinants of the surgical approach and pricing of rhinoplasty and liposuction. Moreover, in-person consultations are often prerequisite Portland, OR 583,776 Nashville, TN 605,473 Phoenix, AZ 1,445,632 Houston, TX 2,099,451 Los Angeles, CA 3,792,621 New York, NY 8,175,133 for price quotations for these procedures, making data collection infeasible. Pricing information and quantities of each procedure performed from January 1, 2013 through December 31, 2013 were obtained by blinded telephone calls and were averaged for each city. Data regarding population size, cost-of-living index, average annual household income, average annual per capita income, and average home value for each city were obtained from the website of the US Census Bureau (www.census.gov). Each city s density of plastic surgeons was obtained from the Dartmouth Atlas of Health Care (http://www.dartmouthatlas.org/) and was represented as the ratio of plastic surgeons per 100,000 residents. Additional factors, including average age of residents and average monthly cost to rent real estate, were abstracted from -Data.com. Economic and demographic statistics were compared with average pricing data for the cosmetic surgery procedures to assess correlation strengths. Coefficients of determination and correlation coefficients were calculated with Microsoft Excel (Microsoft Corp, Redmond, WA). RESULTS The number of augmentation mammaplasty, mastopexy, abdominoplasty, blepharoplasty, and rhytidectomy procedures performed in 2013 in each study city are listed

220 Aesthetic Surgery Journal 35(2) in Figure 1. The 2013 pricing data for each procedure and city appear in Table 2. New York, Los Angeles, and Portland had the highest average procedure costs, whereas Miami, Albuquerque, and Omaha had the lowest. Demographic and economic data by city are summarized in Table 3. Figure 1. Number of procedures performed in the United States in 2013, based on statistics from the American Society for Table 2. Average Price of Each Procedure (in USD) by Augmentation Mammaplasty (saline) Augmentation Mammaplasty (silicone) Mastopexy Abdominoplasty Blepharoplasty Rhytidectomy Average Procedure Cost Albuquerque $4,719.89 $5,428.33 $5,407.60 $6,571.10 $4,202.50 $6,763.90 $5,515.55 Boise $5,474.17 $6,459.00 $7,108.33 $8,058.33 $6,133.33 $9,833.33 $7,177.75 Cincinnati $5,652.78 $6,607.50 $6,565.00 $7,255.00 $4,882.50 $8,303.30 $6,544.35 Houston $5,060.50 $5,950.00 $6,092.50 $7,670.00 $4,075.00 $8,410.00 $6,209.67 Kansas $4,650.10 $5,525.14 $6,062.60 $7,142.80 $5,034.00 $7,978.00 $6,065.44 Los Angeles $6,111.11 $7,362.50 $7,820.00 $8,825.00 $5,860.00 $11,875.00 $7,975.60 Madison $5,521.50 $6,660.29 $6,486.25 $7,415.00 $6,052.50 $8,316.75 $6,742.05 Miami $4,135.00 $5,416.67 $5,835.00 $6,355.00 $3,890.00 $7,890.00 $5,586.95 Nashville $5,294.80 $6,123.75 $6,941.80 $7,415.30 $5,143.60 $9,812.20 $6,788.58 New York $7,925.00 $9,438.89 $9,690.00 $9,600.00 $7,220.00 $11,595.00 $9,244.82 Omaha $4,335.00 $5,106.25 $4,737.00 $5,880.00 $3,742.50 $6,405.00 $5,034.29 Phoenix $5,077.60 $5,884.50 $6,372.10 $8,695.90 $5,830.90 $11,527.20 $7,231.37 Pittsburgh $5,865.60 $7,100.00 $6,691.20 $7,649.90 $3,872.50 $9,006.10 $6,697.55 Portland $6,691.50 $7,590.63 $6,934.50 $8,083.70 $5,159.50 $9,492.50 $7,325.39 Salt Lake $4,165.00 $5,033.33 $5,282.00 $6,736.00 $4,432.50 $9,042.50 $5,781.89 Aesthetic Plastic Surgery. 10

Richardson et al 221 Table 3. Demographic and Economic Factors by Median Resident Age (y) Density of Plastic Surgeons a Cost-of-Living Index b Annual Household Income Annual Per Capita Income Average Home Value Average Monthly Rent Albuquerque 35.1 1.5 0.95 $47,333 $26,436 $191,300 $717 Boise 35.3 1.1 0.97 $49,516 $28,084 $197,900 $767 Cincinnati 32.5 1.3 0.94 $34,104 $24,509 $129,100 $588 Houston 32.1 2.5 0.92 $44,124 $26,849 $124,400 $809 Kansas 34.6 1.9 0.98 $45,246 $26,372 $136,900 $725 Los Angeles 34.1 2.6 1.36 $50,028 $28,222 $513,600 $1,094 Madison 30.9 1.1 1.10 $54,093 $30,595 $219,600 $847 Miami 38.8 3.3 1.06 $30,270 $20,732 $257,500 $900 Nashville 33.9 2.1 0.89 $46,141 $27,372 $164,100 $777 New York 35.5 3 2.17 $51,270 $31,417 $514,900 $1,086 Omaha 33.5 1.4 0.88 $46,978 $26,842 $132,700 $716 Phoenix 32.2 2.6 1.01 $48,596 $24,365 $201,000 $836 Pittsburgh 33.2 1.6 0.92 $37,161 $25,619 $87,800 $706 Portland 35.8 1.4 1.11 $50,177 $30,631 $292,800 $867 Salt Lake 30.9 2.9 1.01 $44,501 $26,700 $244,400 $721 a Density of plastic surgeons is per 100,000 residents. b Cost-of-living index is relative to a US average of 1.0. Table 4. Correlation of Average Cosmetic Surgery Prices With Demographic and Economic Variables by Variable Coefficient of Determination, r 2 Correlation Coefficient, r Population size 0.588 0.767 Average resident age 0.006 0.076 Density of plastic surgeons 0.034 0.185 Cost-of-living index 0.615 0.784 Average annual household income Average annual per capita income 0.190 0.436 0.332 0.576 Average home value 0.510 0.714 Average monthly rent 0.483 0.695 Figure 2. Average price of each procedure according to population size. Average prices of the various surgical procedures were compared with demographic and economic variables of the 15 cities to ascertain correlations (Table 4). The average prices of these procedures correlated substantially with population size (r = 0.767), cost-of-living index (r = 0.784), average home value (r = 0.714), and average monthly rent (r = 0.695). Correlations between surgery pricing and annual household income (r = 0.436) or annual per capita income (r = 0.576) were weaker, and only minimal association was found between pricing and resident age (r = 0.076) or plastic surgeon density (r = 0.185). Figures 2 and 3 depict the moderately strong

222 Aesthetic Surgery Journal 35(2) Figure 3. Average price of each procedure according to cost-of-living index (relative to a US average of 1.0). Figure 4. Average price of each procedure according to the ratio of plastic surgeons per 100,000 residents.

Richardson et al 223 correlations of average pricing of cosmetic surgery with population size and cost of living, respectively. Figure 4 shows the weak relationship between pricing and the ratio of plastic surgeons to residents, as evidenced by the randomly distributed data points, nearly flat trend line, and low correlation coefficient. DISCUSSION Surgical cosmetic procedures constitute a large proportion of procedure volume and income for plastic surgeons. 3,11 Therefore, it is imperative that plastic surgeons be attuned to factors that influence the demand for these procedures. It is generally accepted that the Great Recession of 2007 to 2009 affected the cosmetic surgery market, which underwent a 17% decrease in procedure volume from 2000 to 2011. 12 However, the precise impact of the Great Recession on cosmetic surgery remains debatable. Several investigators have found that concerns about economic trends have caused some patients to postpone elective aesthetic procedures. 4,13,14 Others have suggested that the decision to undergo cosmetic surgery involves intentional and premeditated financial choices and is not readily affected by fluctuations in the US economy. 15 Regardless of the level of effect, economic factors do play a role in influencing patient demand for cosmetic surgery. Results of the present study indicate strong associations between the field of cosmetic surgery and the economic environment. Prices of cosmetic surgery procedures correlated positively with financial metrics such as cost-of-living indices and real estate costs. For example, the average price (in USD) of the 5 studied procedures in New York was $9,244.82, nearly double that of Omaha, which had the lowest average procedure price ($5,034.29). Similarly, New York had the highest cost of living, real estate costs, and per capita income, whereas Omaha had the lowest cost of living. This general trend also was noted for individual procedures: prices for breast augmentation, mastopexy, abdominoplasty, blepharoplasty, and rhytidectomy in cities with the highest values for demographic and economic variables were nearly double those in cities with the lowest values. Despite obvious contributions from the economic environment, the pricing of plastic surgery procedures does not coincide with the traditional model of supply and demand. Specifically, this model assumes that demand for plastic surgery is represented by the quantity of potential patients in a given area, and the number of plastic surgeons in the same region represents supply. The average prices of common cosmetic surgery procedures correlated positively with population sizes by city (r = 0.767), and we expected to find a negative correlation between pricing and the density of plastic surgeons, which would indicate more competitive pricing in areas of increased supply. However, this comparison yielded no correlation (r = 0.185). Instead, prices remained high in cities with high surgeon-to-patient ratios, such as New York, Los Angeles, and Phoenix. Several factors may account for this deviation of plastic surgery pricing from the supply-and-demand model. Cities with the highest densities of plastic surgeons also had the largest population sizes and the healthiest economies. The greater supply of plastic surgeons in these cities likely was counterbalanced by disproportionately higher consumer demand. Krieger et al 4 noted a similar phenomenon in 1999 when studying the effect of demand on pricing of plastic surgery procedures. Consumer demand also may be influenced by regional population density, regional culture, ease of acquiring a service, and social perceptions of cosmetic surgery. Los Angeles and New York have other cities of sizable population in close proximity, whereas Omaha and Albuquerque do not. The urban cultural influences of more populous cities may normalize and encourage cosmetic surgery far more than the regional cultures of less populous cities. A limitation of the present study is that these factors were neither controlled nor specifically evaluated. The effect of non board-certified surgeons who perform aesthetic procedures also may contribute to the deviation of cosmetic surgery pricing from normal supply and demand. As the demand for cosmetic surgery has increased, physicians from specialties such as dermatology, otolaryngology, obstetrics, general surgery, and primary care have assumed roles as cosmetic surgeons. In a study of 834 practitioners offering liposuction in Southern California, Camp et al 16 found that 38% of practitioners received no training in cosmetic surgery during their residencies and 6% received no surgical training at all. Research is scant regarding the impact of these competitors on the practices of plastic surgeons, but authors speculate that they may drive down the pricing of surgical and nonsurgical cosmetic procedures. 5,17 It is reasonable to infer that large cities such as New York and Los Angeles would have a substantial number of non plastic surgeons performing surgical cosmetic procedures. Another limitation of this study is that surgeon-specific factors such as popularity and experience were not considered. Surgeons who have practiced for many years and are more experienced typically have larger patient bases than those who are less established. A larger patient base could contribute to additional business from returning satisfied patients and word-of-mouth recommendations. Moreover, newer practices may have lower prices in order to compete with more established facilities. It is difficult to determine the precise contributions of surgeon-specific and practicespecific factors, but it is likely that they had some impact on the pricing data in this study. A final limitation of our study was the relatively small sample size (maximum of 10 practices per city). However, we suggest that our randomly selected sample provided an

224 Aesthetic Surgery Journal 35(2) appropriate representation of plastic surgery data among the 15 cities selected. The Find a Surgeon feature on the ASPS website enabled us to avoid selecting practices based on name recognition, marketing strategy, or popularity, and thus achieve a truly random sample. Some of the less populous cities had 10 or fewer surgeons or practices. For this reason, 10 practices were selected per city to achieve a uniform sample size. Although polling additional practices (or every practice) in the larger cities may have yielded different data, such an approach was beyond the scope of this study. CONCLUSIONS Because cosmetic surgery constitutes an elective and usually out-of-pocket expense, it is expected to follow the laws of basic economics. Procedure pricing is driven by a combination of local economic factors, consumer demand, and surgeon supply. Our results suggest that local economic factors such as cost of living, real estate values, and population size are particularly influential in price setting. By understanding these relationships and staying abreast of economic trends, plastic surgeons may be able to optimize their practices, predict future demand, and set competitive prices. Disclosures The authors declared no potential conflicts of interest with respect to the research, authorship, and publication of this article. Funding The authors received no financial support for the research, authorship, and publication of this article. REFERENCES 1. Wong WW, Davis DG, Son AK, Camp MC, Gupta SC. Canary in a coal mine: does the plastic surgery market predict the american economy? Plast Reconstr Surg. 2010;126(2):657-666. 2. Krieger LM, Shaw WW. Aesthetic surgery economics: lessons from corporate boardrooms to plastic surgery practices. Plast Reconstr Surg. 2000;105(3):1205-1210; discussion 1211-1202. 3. Gordon CR, Pryor L, Afifi AM, et al. Cosmetic surgery volume and its correlation with the major US stock market indices. Aesthet Surg J. 2010;30(3):470-475. 4. Krieger LM, Shaw WW. The effect of increased consumer demand on fees for aesthetic surgery: an economic analysis. Plast Reconstr Surg. 1999;104(7):2312-2317. 5. Krieger LM, Shaw WW. The effect of increased plastic surgeon supply on fees for aesthetic surgery: an economic analysis. Plast Reconstr Surg. 1999;104(2):559-563; discussion 564-555. 6. Krieger LM, Shaw WW. Pricing strategy for aesthetic surgery: economic analysis of a resident clinic s change in fees. Plast Reconstr Surg. 1999;103(2):695-700. 7. Gordon CR, Pryor L, Afifi AM, et al. Hand surgery volume and the US economy: is there a statistical correlation? Ann Plast Surg. 2010;65(5):471-474. 8. Nassab R, Harris P. Cosmetic surgery growth and correlations with financial indices: a comparative study of the United Kingdom and United States from 2002-2011. Aesthet Surg J. 2013;33(4):604-608. 9. Liu TS, Miller TA. Economic analysis of the future growth of cosmetic surgery procedures. Plast Reconstr Surg. 2008;121(6):404e-412e. 10. Cosmetic Surgery National Data Bank: Statistics 2013. Aesthet Surg J. 2014;34(1 suppl):1s-22s. 11. Krieger LM, Shaw WW. The financial environment of aesthetic surgery: results of a survey of plastic surgeons. Plast Reconstr Surg. 1999;104(7):2305-2311. 12. Statistics ANCoPS. American Society of Plastic Surgeons 2013 Plastic Surgery Statistics Report. American Society of Plastic Surgery;2013. 13. Wildin C, Dias JJ, Heras-Palou C, Bradley MJ, Burke FD. Trends in elective hand surgery referrals from primary care. Ann R Coll Surg Engl. 2006;88(6): 543-546. 14. Kurkjian TJ, Kenkel JM, Sykes JM, Duffy SC. Impact of the current economy on facial aesthetic surgery. Aesthet Surg J. 2011;31(7):770-774. 15. Hoppe IC, Pastor CJ, Paik AM. An analysis of leading, lagging, and coincident economic indicators in the United States and its relationship to the volume of plastic surgery procedures performed. Ann Plast Surg. 2012; 69(4):471-473. 16. Camp MC, Wong WW, Wong RY, Camp JS, Son AK, Gupta SC. Who is providing aesthetic surgery? A detailed examination of the geographic distribution and training backgrounds of cosmetic practitioners in Southern California. Plast Reconstr Surg. 2010;125(4): 1257-1262. 17. Yang J, Jayanti MK, Taylor A, Williams TE, Tiwari P. The Impending Shortage and Cost of Training the Future Plastic Surgical Workforce. Ann Plast Surg. 2013.