Price elasticity (Links to an external site.) refers to how changes in price affect the demand for a product or service. Price and quantity demanded hold an inverse relationship; thus, the price sensitivity of an item depends on whether the product is elastic or inelastic. The demand for highly elastic goods will be significantly affected by price variations, while an inelastic product will see little effect. It may seem that price elasticity doesn’t impact the healthcare industry as necessary services would be priced and paid through medical insurance claims. However, when it comes to elective procedures, specifically those related to a person’s aesthetic, price elasticity can play a significant role.
Cosmetic surgeries are often seen as a luxury item and hold equity when pricing increases (Links to an external site.). This can be attributed to a consumer’s perception that a higher fee is correlated with a surgeon’s skill set. This trend goes against the traditional concept of elasticity, where if price rises, demand will decrease and vice versa. Since cosmetic procedures are perceived as luxury services and most patients in the market look for surgeons whose work they admire, it can be said that brand equity causes the service to be inelastic. Meaning if fees are increased, the demand will not see significant effects.
For example, augmentation mammaplasties have become more prevalent in the last 15 years or so. The base for this procedure is $3,824 without hospital fees, medications, or a surgeon’s fee. Many other aspects contribute to an increased cost like physician reputation, geographic location, and materials used like silicone or saline. The cost of a breast augmentation procedure can run upwards of $10,000. Despite the hefty price tag, the U.S. breast implant market size is projected to reach $1 billion by 2025.
Take a look at the ancillary services you provide to your patients and determine if they are elastic. Would your patients still use them if prices increased?
If you haven’t yet, read my last blog (Links to an external site.) about price margins within the cosmetic surgery industry.