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Cosmetic Surgery Procedures as Luxury Goods
Measuring Price and Demand in Facial Plastic Surgery
Ramsey Alsarraf, MD, MPH;
Nicole W. Alsarraf, MES;
Wayne F. Larrabee, Jr, MD;
Calvin M. Johnson, Jr, MD
Arch Facial Plast Surg. 2002;4:105-110.
ABSTRACT
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Objectives To evaluate the relationship between cosmetic facial plastic surgery
procedure price and demand, and to test the hypothesis that these procedures
function as luxury goods in the marketplace, with an upward-sloping demand
curve.
Methods Data were derived from a survey that was sent to every (N = 1727) active
fellow, member, or associate of the American Academy of Facial Plastic and
Reconstructive Surgery, assessing the costs and frequency of 4 common cosmetic
facial plastic surgery procedures (face-lift, brow-lift, blepharoplasty, and
rhinoplasty) for 1999 and 1989. An economic analysis was performed to assess
the relationship of price and demand for these procedures.
Results A significant association was found between increasing surgeons' fees
and total charges for cosmetic facial plastic surgery procedures and increasing
demand for these procedures, as measured by their annual frequency (P .003). After a multiple regression analysis correcting
for confounding variables, this association of increased price with increased
demand holds for each of the 4 procedures studied, across all US regions,
and for both periods surveyed.
Conclusions Cosmetic facial plastic surgery procedures do appear to function as
luxury goods in the marketplace, with an upward-sloping demand curve. This
stands in contrast to other, traditional, goods for which demand typically
declines as price increases. It appears that economic methods can be used
to evaluate cosmetic procedure trends; however, these methods must be founded
on the appropriate economic theory.
INTRODUCTION
THERE HAS BEEN recent interest in the use of economic methods to analyze
the pricing, supply, and demand of cosmetic plastic surgery procedures in
the free marketplace.1-2 Krieger
and Shaw3 have argued that aesthetic procedures,
unlike other areas of health care, can be analyzed by traditional economic
methods and should react in traditional ways to market forces, given the unique
nature of cosmetics compared with other insurance-based procedures. The fact
that most cosmetic procedures are out-of-pocket expenses for the patient without
third-party involvement does imply that these procedures may be able to be
studied without the limitations that constrain other realms of health care
economic analysis.
The use of economic methods in this manner focuses on the measurement
and evaluation of the price, supply, and demand of cosmetic procedures and
the relationship of these important factors. The application of these methods,
however, does not dictate that individuals seeking cosmetic plastic surgery
procedures will act to maximize their utility by following the laws of classic
economics. For instance, critical variants in demand behavior have long been
ascribed to certain types of goods and services in neoclassic economic thought.
Although the consumption of most goods and services does take the form of
a downward-sloping demand curve in the free marketplace, with an increase
in price leading to a decrease in demand, economists have long known that
not all goods elicit this classic behavior. The great economist Alfred Marshall4(p98) refers to this variant when he writes, in his
landmark Principles of Economics, "There are many
classes of things the need for which on the part of any individual is inconstant,
fitful, and irregular. There can be no list of individual demand prices for
. . . the services of an expert surgeon."
Although Marshall concentrates on traditionally sloped supply-and-demand
curves, he is careful to point out that not all goods are consumed in this
fashion. These nontraditional goods, commonly referred to as Giffen goods,
follow the pattern of an upward-sloping demand curve. For these items, an
increase in price actually leads to an increase in demand. Marshall writes:
"For instance, as Sir R. Giffen has pointed out, a rise in . . . price . .
. [may lead to] . . . consuming more, and not less. . . . But such cases are
rare; when they are met with, each must be treated on its own merits."4(p132)
As Marshall describes, this demand phenomenon is rare and interesting
because it is the increase in price that creates the increase in demand and
not, as typically expected, the converse. In classic economic behavior, an
increase in demand for one reason or another leads to a decrease in supply
and, consequently, an increase in price. The forces of supply and demand reach
an equilibrium price point because such an increase in price classically leads
to a subsequent decrease in demand. Consumer behavior toward the Giffen goods
thus stands in sharp contrast to this expected behavior.
In addition to Giffen goods, some luxury goods also elicit this nontraditional
behavior in the free marketplace, resulting in a similarly upward-sloping
demand curve, with increased price leading to increased demand. Unlike Giffen
goods, this unusual demand behavior is secondary to the consumer's perception
that more expensive goods or services are better than the less expensive alternatives.
As the price increases, rather than substituting the next best good or service
that is available at a lower price to maximize monetary utility, many consumers
of certain luxury goods in fact maximize their utility by electing to pay
more to support their belief that they have purchased the best. This perception
may be based on actual benefits, such as better surgical results or technical
skills, or simply on the perceived status and prestige that is associated
with that good or service. The reasoning, however, is inconsequential in the
aggregate, as it is the consumer's highly individual perception associated
with the increasing price that leads to an increased demand for the more expensive
service.
There has long been anecdotal evidence in the facial plastic surgery
community that increases in the price of cosmetic procedures may lead to increases
in the demand for those procedures. There are, however, to our knowledge,
no data in the literature to support these anecdotes. This study tests the
hypothesis that cosmetic plastic surgery procedures function as luxury goods
in a free marketplace, ie, follow the laws of an upward-sloping demand curve.
Given that cosmetic plastic surgery is indeed an elective, out-of-pocket,
luxury item, it seems that this hypothesis makes plausible sense. The general
geographic and temporal trends in cosmetic facial plastic surgery procedure
cost have already been published elsewhere,5
and this study analyzes those data with regard to our economic hypothesis.
MATERIALS AND METHODS
A survey was sent to every active member of the American Academy of
Facial Plastic and Reconstructive Surgery, including fellows, members, and
associates (N = 1727). Members were queried as to the surgeon's fees, total
patient charges, and annual frequency of 4 common cosmetic facial plastic
surgery procedures for 1999 and 1989: face-lifts, brow-lifts, blepharoplasty,
and rhinoplasty. A total of 264 surveys (15.3%) were returned and included
in this study.
The analysis was conducted using the Statistical Product and Service
Solutions (SPSS Inc, Chicago, Ill) computer software program. Demographic
variables, procedure frequency, and cost data were evaluated for the 2 periods
surveyed and were based on 4 US geographic regions to assess significant trends.
Statistical significance was analyzed using independent and paired t tests where appropriate, and significance was assumed at P = .05. Confounding variables that were significantly related to increased
procedure demand were included in a multiple regression analysis of demand
for procedures as a function of increasing procedure price. A linear curve
fit was conducted to obtain the best linear model for the regression analysis;
these results are provided in the figures that follow.
RESULTS
For demographic characteristics, this study population was relatively
homogeneous, with most respondents being approximately 46 years old, male
(93.9%), and almost 15 years in practice. Most respondents (81.1%) work in
the private practice setting, and although there was a wide range in the cosmetic
nature of each practice, the average respondent's practice was approximately
40% cosmetic. Most of those surveyed (69.3%) used some form of marketing;
however, this represented only a small fraction (5.1%) of most respondents'
annual overhead.
The geographic and temporal trends in procedure cost and frequency have
been previously published.5 These previously
published data show that from 1989 to 1999 there has been an increase in aging
face procedure frequency and cost, while rhinoplasty frequency has actually
declined. In addition, there were important regional differences, with the
East found to have significantly fewer aging face procedures on an annual
basis, with equal numbers of rhinoplasties when compared with the West, Midwest,
and South. This previous study also found that the variables that are associated
with increased demand for cosmetic facial plastic surgery procedures include
age, years in practice, and the percentage of overhead spent on marketing.
The strongest correlates with cosmetic procedure demand, however, are the
actual prices of these procedures, as represented by surgeons' fees and total
patient charges (P.008). For example, the annual
number of face-lift procedures is only weakly correlated with the surgeon's
age (r = 0.20, P = .004),
but is strongly correlated with the surgeon's fee for that procedure (r = 0.47, P<.001).5
Comparing the percentage that a given practice was cosmetic with these
measurements of procedure price revealed a significant association of increasing
price with increasing cosmetic percentage (Table 1). In addition, when the cosmetic percentage was stratified
into 50% or greater or less than 50% cosmetic, there was a statistically significant
increase in fees associated with the more cosmetically oriented practices
when compared with those that are less cosmetic (Table 2).
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Table 1. Correlation of Increased Costs With Increased Cosmetic Percentage
of Practice for 1999*
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Table 2. Comparison of Cosmetic Facial Plastic Surgery Procedure Price
(Surgeons' Fees) by Cosmetic Nature of Practice
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Multiple regression analysis correcting for other associated confounding
variables (age, years in practice, and marketing percentage) revealed strong
linear correlation of increasing price with increasing cosmetic procedure
demand, particularly for the aging face procedures (Table 3). For instance, after these corrections, increasing surgeons'
fees for face-lifts were significantly correlated with increased annual number
of face-lifts performed. This relationship was investigated for each of the
procedures studied, across all US regions, and for 1999 and 1989. Figure 1 shows the linear curve fit generated
for this model, comparing face-lift fees with the annual number of procecures
performed in 1999. This curve represents an upward-sloping demand curve, with
increased price associated with increased demand. Because regional and temporal
differences in the cost and frequency of these procedures were previously
shown, we also tested this model for each US region, and on a state-by-state
basis. For example, Figure 2 and Figure 3 show similar linear relationships
for the East and California, respectively; in both cases, the same upward-sloping
demand curve is represented, with a significant association of increased price
and increased demand. Linear regression analysis of this same relationship
in 1989 also revealed a similar curve fit, albeit with a less strong statistical
association (Figure 4). The other
3 procedures evaluated in this study (brow-lifts, blepharoplasty, and rhinoplasty)
also showed upward-sloping linear trends, with significant associations of
increased price and increased demand (Figure
5, Figure 6, and Figure 7, respectively).
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Table 3. Multiple Regression Analysis of Increasing Cosmetic Facial
Plastic Surgery Procedure Price With Demand for 1999*
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Figure 1. Linear curve estimate of increasing
surgeons' fees and annual procedure number, with results of multiple regression
analysis (r = 0.45, P<.001) for face-lifts in
the United States in 1999.
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Figure 2. Linear curve estimate of increasing
surgeons' fees and annual procedure number, with results of multiple regression
analysis (r = 0.54, P = .007) for face-lifts in the
East in 1999.
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Figure 3. Linear curve estimate of increasing
surgeons' fees and annual procedure number, with results of multiple regression
analysis (r = 0.56, P = .002) for face-lifts in California
in 1999.
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Figure 4. Linear curve estimate of increasing
surgeons' fees and annual procedure number, with results of multiple regression
analysis (r = 0.24, P = .02) for face-lifts in the
United States in 1989.
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Figure 5. Linear curve estimate of increasing
surgeons' fees and annual procedure number, with results of multiple regression
analysis (r = 0.26, P<.001) for brow-lifts in
the United States in 1999.
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Figure 6. Linear curve estimate of increasing
surgeons' fees and annual procedure number, with results of multiple regression
analysis (r = 0.24, P = .001) for blepharoplasties
in the United States in 1999.
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Figure 7. Linear curve estimate of increasing
surgeons' fees and annual procedure number, with results of multiple regression
analysis (r = 0.22, P = .003) for rhinoplasties in
the United States in 1999.
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COMMENT
An analysis of the cost outcomes of facial plastic surgery procedures
is an important component of outcomes research in general, and allows one
to begin to understand the intricacies of the relationships between price,
supply, and demand for cosmetic procedures.6
Researchers7-8 have advocated
that there is a need for increased efforts on the part of all plastic surgeons
to better quantify, measure, and assess outcomes of cost and effectiveness,
if there is to be a more rigorous and scientific approach to the comparison
of plastic surgery outcomes in general.
Although other studies1-3
have argued that aesthetic plastic surgery procedures may respond in traditional
ways to market forces, this study found that cosmetic facial plastic surgery
procedures do not. In fact, these procedures appear to function as luxury
goods, exhibiting a variant demand behavior that creates an upward-sloping
demand curve. For each of the procedures studied, across all US regions, and
for both periods of interest, increasing price was associated with increased,
rather than decreased, demand, as measured by the annual number of procedures
performed.
Looking more closely at 2 other recent economic analyses of aesthetic
plastic surgery procedures may reveal the reason for this apparent contradiction.
The first study, by Krieger and Shaw,1 examines
the effect that dividing fees in half in a residents' clinic had on the number
of aesthetic procedures performed. Although the researchers show a large (250%)
increase in procedures, in reality the numbers were quite limited (from 4
to 14) and the study was conducted for only a 4-month period, without mention
of other confounding factors, such as the change in residents and their relative
interest in recruiting patients undergoing aesthetic procedures during that
period. More important, the setting of a residents' clinic does not capture
the luxury quality of cosmetic plastic surgery procedures in the private practice,
real-life setting. It is quite possible that patients who are seeking aesthetic
surgery in a residents' clinic may be looking for the least expensive procedures
from the start and, thus, it makes sense that a decrease in price may lead
to increased demand. This, however, simply represents one limited aspect of
a spectrum of patients undergoing aesthetic surgery, and misses most patients
who would not seek an aesthetic procedure in the setting of a teaching clinic.
The second study, also by Krieger and Shaw,2
compares the fees for aesthetic procedures cross-sectionally in 3 US states
with different plastic surgeon densities. They found that, after correcting
for cost-of-living differences, increased surgeon supply was associated with
decreased surgery fees. Changes in demand or in number of procedures were
not measured in this study. In addition, as a cross-sectional study, there
was no way to assess changes in actual supply in specific geographic regions,
and correcting for regional differences was impossible. Unfortunately, this
study appears to mistake measurements of supply with the measurement of demand
needed to create an accurate demand curve for aesthetic procedures. In fact,
the curves that they present appear to be mislabeled and make little economic
sense. For example, in Figure 1
of their study, the y-axis denotes price per procedure, yet the x-axis represents
the quantity of surgeons rather than the quantity of procedures. In this way,
Krieger and Shaw have essentially combined the elements of what should be
2 separate demand curves into 1. Furthermore, looking at the raw data presented
in the article reveals that in actuality the state with the highest supply
of plastic surgeons (New York) did indeed have the highest fees as well. It
is only after the researchers' correction for cost of living that this relationship
reverses. It is unclear if such a correction is justified or even advisable
in this setting. For instance, in our own study, we found that a significant
amount of the cosmetic surgery business (8.5%) came from out of state. Some
of those physicians surveyed who have the highest fees and largest practices
(>130 face-lifts annually) reported up to 80% of their business coming from
out of state. For this reason, cost-of-living corrections do not seem to make
sense, as many patients pay for procedures in cities or areas of the country
in which they do not reside or work. In any case, it is unclear whether the
relationship between supply and price that Krieger and Shaw describe is truly
related to an economic phenomenon or whether it is simply the product of these
statistical corrections.
The main limitation of our study is the low response rate (15.3%) from
those American Academy of Facial Plastic and Reconstructive Surgery members
surveyed. Unfortunately, given the sometimes sensitive nature of price issues,
this poor response may have been unavoidable. Those members who did respond,
however, represented a good sampling of the American Academy of Facial Plastic
and Reconstructive Surgery community, with a wide range of procedure types
(eg, 0%-100% cosmetic), frequency (eg, 0-275 reported face-lifts per year),
and cost (eg, $1750-$12 500 for face-lift surgeons' fees). Fortunately,
with 264 respondents, we were able to perform most statistical analyses without
limitations of study number and with enough power to show statistically significant
differences.
What is the reason that there would be increased demand for aesthetic
surgery procedures with higher prices? There appears to be an intangible quality
associated with certain expensive luxury goods and services that attracts
the consumer and creates the perception that such a good or service is superior
to similar, less expensive products. Marshall4(p106)
highlights this intangible quality when he writes:
The current prices of such things as . . . highly skilled medical
assistance [may be] so high that there is but little demand for them except
from the rich: but what demand there is, often has considerable elasticity.
Part of the demand for the more expensive kinds . . . is really a demand for
the means of obtaining social distinction, and is almost insatiable.
The social scientist, Thorstein Veblen, has also discussed this phenomenon
with regard to the conspicuous consumption of luxury items. Veblen9(p158) writes, "the habit of making obvious costiliness
[sic] a cannon of serviceablity [sic] . . . puts us on our guard against cheapness by identifying merit
in some degree with cost. . . . It is felt that inexpensiveness would derogate
from the dignity that should invest an article."
Clearly, it is difficult, if not impossible, to distinguish between
the myriad of factors that makes a consumer choose one plastic surgeon over
another. Reputation is a complex characteristic to understand, and at least
part of what constitutes a good reputation is related to having happy patients
who have had good surgical results. As Marshall4
notes, however, as with any luxury good purchase, the perception that an expensive
service is better than another less expensive service may be related to factors
of prestige, status, and social distinction rather than more concrete differences.
And even though the consumer is free to substitute a less expensive similar
service (eg, surgeon), the status-conscious consumer does not. In this way,
increased pricing may act to increase demand by instilling a sense of this
prestige, status, quality, or distinction.
CONCLUSIONS
There is a significant association between increasing surgeons' fees
and total charges for cosmetic facial plastic surgery procedures and increasing
demand for these procedures, as measured by their annual frequency. After
a multiple regression analysis correcting for confounding variables, this
association of increased price with increased demand holds for each of the
4 procedures studied, across all US regions, and for both periods surveyed.
Cosmetic facial plastic surgery procedures appear to function as luxury goods
in a free marketplace, with an increase in price associated with an increase
in demand and an upward-sloping demand curve. Thus, this stands in sharp contrast
to the classic economic model in which demand declines as price increases.
Economic methods can be used to evaluate cosmetic procedure trends; however,
these methods must be founded on the appropriate economic theory.
AUTHOR INFORMATION
Accepted for publication December 13, 2000.
Corresponding author: Ramsey Alsarraf, MD, MPH, The Newbury Center,
69 Newbury St, Boston, MA 02116 (e-mail: ralsarraf{at}thenewburycenter.com).
From the Hedgewood Surgical Center, New Orleans, La (Drs R. Alsarraf
and Johnson); and the Larrabee Center for Facial Plastic Surgery, Seattle,
Wash (Dr Larrabee). Ms N.W. Alsarraf is a private consultant. Dr R. Alsarraf
and Ms N. W. Alsarraf are now at The Newbury Center, Boston, Mass.
REFERENCES
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4. Marshall A. Principles of Economics. 8th ed. London, England: Macmillan; 1920.
5. Alsarraf R, Larrabee WF Jr, Johnson CM Jr. Cost outcomes of facial plastic surgery: regional and temporal trends. Arch Facial Plast Surg. 2001;3:44-47.
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6. Alsarraf R, Larrabee WF Jr. Outcomes research in facial plastic surgery [comment]. Arch Facial Plast Surg. 2001;3:7.
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9. Veblen T. The Theory of the Leisure Class. 3rd ed. New York, NY: Viking; 1931.
RELATED LETTER
Economics of Aesthetic Surgery
Lloyd M. Krieger and Ramsey Alsarraf
Arch Facial Plast Surg. 2002;4(3):200.
EXTRACT
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THIS ARTICLE HAS BEEN CITED BY OTHER ARTICLES
Economics of Aesthetic Surgery
Krieger and Alsarraf
Arch Facial Plast Surg 2002;4:200-200.
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