Orthopedic Industry Analysis

As the baby boomer generation started to age and swell the ranks of senior citizens in need of hip and knee replacements, the orthopedic industry braced for significant growth. However, the recession of 2008 and the uncertain costs and effects of health care reform have reshaped the industry's outlook.

Decline in Demand

• Analysts blame the troubled economy and high unemployment for a decline in orthopedic surgeries. People who lost job also lost health insurance. Those with insurance have seen deductibles skyrocket, and some policies have limited coverage for elective surgeries. As a result, people are passing on elective orthopedic surgeries and coping with weak knees and bad backs.

Health Care Reform

• To fund health care reform, manufacturers that produce artificial joints, hips and knees will face a new $20 billion tax starting in 2013. Also, Medicare is expected to pay only for the most cost-effective devices that have been been through extensive trials and studies. Some worry these changes will stunt the research, development and innovation that have been the orthopedic device industry's hallmarks.

Surgeons

• More orthopedic surgeons who are facing cuts in payments from insurers and hikes in overhead costs are expected to give up private practices in favor of hospital jobs. Still, a shortage of orthopedic surgeons is expected to hit the health care system over the next decade.