Demand, Supply, and Knee Replacement

by Elaine Schwartz    •    Nov 15, 2010    •    713 Views

Hearing about knee replacement surgery from a friend, I soon realized it is about much more than an operation. It involves demand, supply, innovation, and the quality and cost of national medical care.

First the facts: For knee replacement surgery, patients can select a traditional approach or one that is minimally invasive. The vast majority of surgeons have been trained to perform traditional knee replacement surgery. The minimally invasive approach is newer and requires relatively extensive training. A recent study indicated that with the newer approach, not only do patients heal faster but also there were cost-savings “to the health care provider and the health care system.” 

The question: If current evidence indicates that patients heal faster and the health care system has lower costs, why do most surgeons recommend traditional total knee replacement surgery?

The Economic Lesson

Thinking economically about total knee replacement surgery, our goals are well-being, efficiency, and innovation. For the demand side, well-being comes from more success and less dollar cost. On the supply side also, well-being and cost effectiveness are important. Here, though, we have a divergence. It is more (opportunity) cost effective for most surgeons to perform the traditional approach that they already know. Learning a new procedure is time consuming and upsets an established practice.

What does all of this mean? What might be best for the demand side, for controlling government spending, and for perpetuating the innovation that spurs economic growth is not best for the supply side.

If we figure out how to change supply side incentives, perhaps we can slow down escalating health care expenses.



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