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Canary in a Coal Mine: Does the Plastic Surgery Market Predict the American Economy?

Wong, Wendy W. M.D.; Davis, Drew G. B.S.; Son, Andrew K. B.S.; Camp, Matthew C. M.D.; Gupta, Subhas C. M.D., C.M., Ph.D.

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Plastic and Reconstructive Surgery: August 2010 - Volume 126 - Issue 2 - p 657-666
doi: 10.1097/PRS.0b013e3181de248b
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Abstract

Many variables contribute to and are factored into an ever-changing, dynamic economy. Economics is a complex study of how consumers and suppliers behave during times of scarcity and excess, with the decisions of each affecting the conditions of the other. Principles and tools of economics are helpful in predicting consumer behavior and altering and optimizing revenues.1

Traditionally, the plastic surgery market is not thought of as following the standard laws of economics, as it is a combination of both insurance-paid reconstructive and patient self-paid aesthetic procedures, thereby making its behavior seemingly challenging to predict.2 However, some still believe that plastic surgery productivity trends precede those of the economy, as this market, mainly the cosmetic aspect, follows the standard laws of economics.1–4 In light of the recent large-scale recession, plastic surgeons have come to wonder whether such changes can be reliably predicted or associated with this extremely specialized field. As practitioners of such a specialized group, it is therefore essential and beneficial to review past economic trends and investigate the resulting effects it has had on their practices. If the plastic surgery market can indeed be shown to closely parallel trends in the economy, plastic surgeons have a powerful tool with which to optimize their practices in various circumstances.2

This study examined three different aspects of plastic surgery and their relationship with economic trends. First, revenues from our multiple-surgeon practice were compared with economic indicators to assess the predictive power of plastic surgery practices relative to economic trends. Next, we examined procedure trends and searched for an economic indicator that showed the best correlation for cosmetic, reconstructive, and minimally invasive procedure volumes as reported by the American Society of Plastic Surgeons over the past 13 years. Our hypothesis is that reconstructive procedures would have little correlation with economic indicators, as they are covered by insurance, whereas cosmetic and minimally invasive procedures would have better correlation with the same indicators. Cosmetic procedures were expected to decrease during a recession because of a decline in government reimbursement, causing patients to hold off on luxury procedures and plastic surgeons to change their practice mixture. Overall, with the increasing popularity of botulinum toxin type A (Botox; Allergan, Inc., Irvine, Calif.) and hyaluronic acid [Juvederm (Allergan) and Restylane (Medicis, Scottsdale, Ariz.)], the number of minimally invasive procedures is expected to increase steadily with germinating options, such as replacing surgical rhinoplasties with “minirhinoplasties.” Lastly, we examined the relationship between our multiple-surgeon revenues and search words related to plastic surgery procedures on a popular search engine. If patients were searching for a particular procedure in high volumes, one would expect to see this reflected in procedure volumes.

MATERIALS AND METHODS

Plastic Surgery Correlation with Economy

To ascertain the predictive nature of aesthetic plastic surgery procedures, the monthly patient self-payment income of an academically based plastic surgery group was compared with 18 economic indices (Table 1) tabulated on at least a monthly basis. Two craniofacial surgeons, two breast reconstructive surgeons, two surgeons with 50 percent aesthetic practices, and two broad reconstructive surgeons constitute this practice and perform large and well-balanced volumes of both cosmetic and reconstructive procedures. The monthly self-payment income of the group composed of eight surgeons was divided by the number of surgeons contributing for each corresponding month. This practice is an accrual accounting–based practice with payments recorded on a real-time cash flow basis. The inherent volatility of the group's income was then corrected by creating a 90-day rolling average of the income per surgeon. These values were then plotted against the chosen indices. The influence of the local economy was taken into account by charting the inflation-adjusted median home price during the time frame of the study. The trend of this plot was superimposed onto that of each economic indicator within the same time frame and subsequently examined for any predicting relationships. To validate the relationship of the aesthetic plastic surgery market with the economy, non–self-payment (or reimbursement) income was also plotted against the economic indices.

Table 1
Table 1:
Economic Indicators Analyzed

Procedural

The association between the volume of cosmetic, reconstructive, and minimally invasive procedures (Table 2) performed by members of the American Society of Plastic Surgeons and 18 major economic indices was analyzed for correlation. The American Society of Plastic Surgeons is the largest organization of board-certified plastic surgeons, representing more than 7000 members and 94 percent of all board-certified plastic surgeons in the United States. Annual survey data tabulated in the American Society of Plastic Surgeons National Plastic Surgery Statistics database provides information about the total volume of plastic surgery procedures.5 Each procedure was compared with a number of annual indices, including the Dow Jones Industrial Average, the Standard and Poor's 500, the Standard and Poor's Retail Index, the National Association of Securities Dealers Automated Quotations (NASDAQ), the Gross Domestic Product, Personal Income, Personal Savings, and Travel Rates (Table 1). Economic data were gathered from both government and private sources,6–12 18 of which were included in generating regression coefficients.

Table 2
Table 2:
Plastic Surgery Procedures Analyzed

A comprehensive selection of aesthetic plastic surgery procedures was chosen for this analysis, including breast augmentation, mastopexy, blepharoplasty, rhytidectomy, liposuction, scar revision, rhinoplasty, and abdominoplasty. Studies of minimally invasive procedures included Botox injections, chemical peels, laser hair removal, laser skin resurfacing (nonspecific), microdermabrasion, sclerotherapy, collagen injection, and dermabrasion. These procedures were used because most are elective and subsequently more resistant to the confounding factor of insurance payment. Reconstructive procedures included breast reconstruction, breast reduction, lacerations, correction of congenital disabilities, and the correction of maxillofacial defects. The annual volume of these procedures from 1996 onward was obtained from the American Society of Plastic Surgeons.

Search Engine Word Trends

The frequency with which certain terms or phrases were searched for in a popular search engine was examined with Google Trends (Table 3). Each word or term yielded a graph of search frequencies that was compared with the graph of our multiple-surgeon income.

Table 3
Table 3:
Plastic Surgery Procedure Terms Searched with Google Trends (including lay terms)

Statistical Analysis

Statistical analysis was performed using linear regression. A correlation was generated between every procedure and all chosen indices using Microsoft Excel (Microsoft Corp., Redmond, Wash.). Paired data sets with correlations between 0.8 and 1.0 were considered to have a high correlation, whereas correlations between 0.7 and 0.8 were considered to have moderate correlation.

RESULTS

Plastic Surgery Data with the Economy

Of the 18 economic indicators studied, all had a recognizably similar trend when compared with that of our multiple-surgeon 90-day rolling average revenue; however, the four that bore the closest resemblance were the NASDAQ Close, Standard and Poor's 500 Retail Index, Standard and Poor's 500 Close, and Dow Jones Industrial Average Close (Figs. 1 through 4, above). Each of these plotted economic indicators trailed the fluctuations in the income of our practice by 1 month. To verify that the multiple-surgeon revenue did have a national economic basis rather than just being locally indicative, this was plotted with the inflation-adjusted house prices in neighboring Los Angeles (Fig. 5). No fluctuations and correlation could be appreciated with the latter, validating the comparison between the group's revenue and national indices. Although the plotted reimbursement graphs share a few similar peaks and troughs to the economic indicator plots (Figs. 1 through 4, below), there was neither a consistent correlation between the two nor a predictive value to the reimbursement plots. Thus, the self-payments far better correlate with and predict the trends of these economic indicators.

Fig. 1.
Fig. 1.:
Dow Jones Industrial Average plotted against (above) patient fees per surgeon 90-day average and (below) reimbursement per surgeon 90-day rolling average.
Fig. 2.
Fig. 2.:
Standard and Poor's 500 plotted against (above) patient fees per surgeon 90-day average and (below) reimbursement per surgeon 90-day rolling average.
Fig. 3.
Fig. 3.:
NASDAQ plotted against (above) patient fees per surgeon 90-day average and (below) reimbursement per surgeon 90-day rolling average.
Fig. 4.
Fig. 4.:
Standard and Poor's (S&P) Retail plotted against (above) patient fees per surgeon 90-day average and (below) reimbursement per surgeon 90-day rolling average.
Fig. 5.
Fig. 5.:
Patient fees per surgeon 90-day rolling average (blue) plotted with inflation adjusted housing prices (orange).

Procedural Data

Eighteen economic indicators and 33 plastic surgery procedures were selected for this study (Table 1). Although it is noted that indices such as the NASDAQ and Dow Jones Industrial Average are those of volatility, these were used in this study, as their changes carry the potential to affect the economy and to verify results of previous authors.1 Gross Domestic Product, Gross Domestic Product in billions of chained 2000 dollars, personal income, and NASDAQ volume were found to have the strongest correlations with the most number of procedures analyzed (Table 4). The Consumer Price Index, Annual Inflation Rate, Federal Funds Rate, and Personal Savings had the lowest number of correlations. Both cosmetic and minimally invasive procedures have increased steadily, with liposuction and hyaluronic acid fillers leading the expansion. Reconstructive procedures as a whole continued to increase over the past 13 years, which deviated from our hypothesis that it would remain stable, as it is an insurance-paid group. However, this is likely attributable to the higher detection rate of breast cancer, a steadily growing population, and persistent numbers of motor vehicle accidents.

Table 4
Table 4:
Correlations of Economic Indicators and Plastic Surgery Procedure Volumes for 33 Different Procedures

Search Engine Word Trends

Twenty-three terms and phrases were examined with Google Trends, 22 of which (excluding “lipo”) demonstrating similar, stable trends (Fig. 6). These did not correlate with economic parameters, American Society of Plastic Surgeons–reported procedural data, or our multiple-surgeon 90-day rolling revenue average. The search term “lipo” yielded an increase in search frequency from 2004 to 2009.

Fig. 6.
Fig. 6.:
The fluctuation of search terms for breast augmentation, face lift, tummy tuck, and lipo. Lettered flags represent relevant news articles that, on magnification, created an increase in search frequency.

DISCUSSION

Although some have thought that the plastic surgery market does not follow the standard laws of economics because of its mixed source of pay, this study has shown that this is not the case. Fluctuations in demand for plastic surgery were found to precede changes in the economy by approximately 1 month. To account for the effect of the local economy on our practice income, we charted the inflation-adjusted median home price in Los Angeles. The income from our practice paralleled the median home price, but with a greater sensitivity in predicting national economic indicators. Our multiple-surgeon practice is composed of both cosmetic and reconstructive surgeons, making it reasonable to extrapolate our payment data and apply them to the plastic surgery market as a whole. If the findings from our study can be generalized to other practices, plastic surgeons have an extremely powerful tool with which to sense when the economy will change by following their own practice revenues. This information could be a useful adjunct to improve practice planning to maximize income during lean times and manage expectations of revenue flow.

Previous economic studies have been performed in association with plastic surgery parameters. Some have attempted to adjust for the increasing number of surgeons, but this was not relevant in this particular study, as the demand for procedures and the supply of financial resources was of interest. Previous authors studied the growth of the economy and determined that the Gross Domestic Product and Federal Funds Rate were the best to predict broad categories of plastic surgery growth, using 0.48 as a marker for good correlation.13 We believe that it is unrealistic to attempt to predict the future growth of cosmetic surgery, as the degree, duration, and occurrence of economic downturns are often unpredictable. Surely, with the ever-increasing U.S. population, increasing interest in cosmetic procedures attributable to reality television shows dramatizing cosmetic operations, and preference for reconstructive procedures, the overall volume of plastic surgery procedures will continue to steadily climb.14 In our study, past specific procedural volumes were found to have good correlation with Gross Domestic Product but poor correlation with Federal Funds Rate.

There has been speculation regarding what the future of this very specialized field will look like. Some believe the recent 4.4 million jobs lost combined with the downtime for postsurgical recovery will cause an immense decrease in cosmetic procedures.15,16 In contrast, plastic surgeons have noticed an increase in the number of middle-aged patients seeking blepharoplasties, Botox injections, and dermal fillers. Men are increasingly seeking to enhance their appearance in attempts to stay competitive in a youthful workforce.17 Reconstructive procedures will continue to rise, as people will always require reconstruction for motor vehicle accidents and oncologic resections.16 The volume of plastic surgery procedures performed, including both cosmetic and reconstructive categories, has increased steadily over the past 13 years and will likely continue to do so.

Interestingly, the search term “lipo” was the only one that demonstrated a steady increase in search frequency. This may be attributable to the progressing number of overweight and obese Americans who may be in search of a quick way to shed the pounds; however, this is only a speculation, and further research will be necessary to give a concrete explanation for why liposuction is such a popular search term.

In our study, the search term activity on the Internet has remained constant over the past 4 years, demonstrating that the population has a continuing interest in plastic surgery procedures, regardless of the state of the economy. This continued public receptivity to plastic surgery reveals the opportunity for practice growth even as the economy undergoes a correction. John Canady, former American Society of Plastic Surgeons president, believes that repeat patients and those putting off surgery will likely sustain the demand for some minimally invasive procedures as the generation following the baby boomers begins to explore surgical options.18

REFERENCES

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16. Recession cuts many, not all plastic surgery procedures: Smallest year-over-year growth on record for cosmetic procedures. Available at: http://www.plasticsurgery.org/Media/Press_Releases/Cosmetic_Procedures_Up_in_All_Ethnic_Groups_Except_Caucasians_in_2008/Recession_Cuts_Many_Not_All_Plastic_Surgery_Procedures.html. Accessed July 18, 2009.
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