OBJECTIVES: The availability of rFVIIa has improved the feasibility of orthopedic surgery in hemophiliacs with high titer inhibitors and hemophilic arthropathy, leading to reductions in bleeding episodes and improvements in pain, function and mobility, and quality of life. This analysis explored the cost utility of various elective knee surgeries with rFVIIa coverage in hemophiliacs with inhibitors from a US payer perspective. METHODS: A literature-based Markov model was used to compare the direct medical costs and quality-adjusted life-years (QALYs) of 2 hypothetical cohorts of hemophiliacs with inhibitors and frequent bleeding episodes: one undergoing elective orthopedic surgery and the other not undergoing surgery. Based on the published literature, surgery was assumed to reduce bleeding frequency by 82%, from 9.13 to 1.64 episodes per year, and improve pain and quality of life. Surgery costs included perioperative rFVIIa costs, inpatient and rehabilitation care, and repeat procedures. RESULTS: Estimated knee surgery costs ranged from $677,000 (in knee arthrodesis [KA]) to $840,000 (in total knee replacement [TKR]). Surgery reduced the incidence of bleeding episodes and resultant costs. Specifically, the cumulative discounted savings in bleeding-related costs were $537,000 and $991,000 at 5 and 10 years, respectively. Overall, the cost of surgery was offset within 7 to 9 years of the index procedure, depending on the surgery. Surgery also resulted in discounted net gains of 1.88 and 3.47 QALYs after 5 and 10 years, respectively. The cost per QALY gained with KA and TKR fell under $50,000 during the 6th and 7th years, respectively. Changes in assumptions regarding prophylaxis regimen, survival, baseline bleeding frequency, patient weight, and rate of repeat surgery affected the results to various degrees. CONCLUSION: Despite high upfront costs, knee surgery with rFVIIa in hemophiliacs with inhibitors leads to cost savings and QALY gains within a few years, primarily due to reductions in bleeding episodes.