The objectives of this study were to assess trends in referral patterns for joint replacements (JRs) in Ontario between the fiscal year 1988/89 and the fiscal year 1993/94; to assess the redistribution of financial resources if services were provided to residents in the region where they reside; and to estimate the financial implications of the devolution of primary JRs from tertiary-care hospitals to community hospitals. Despite rapid growth in the provision of JRs, there was no significant change in their regional distribution. Community hospitals have increased their share of JRs at the expense of teaching hospitals. For hospitals located in Central east Ontario, the cost of providing JRs to nonresidents increased from $ 5.9 million in 1988/89 to $8.3 million in 1993/94. Devolution of primary JRs requires a minimum reallocation sum of $25.1 million, with potential cost savings of $4.3 million. Many obstacles limit the devolution and local provision of health care services, including modifications to referral patterns and the availability of provider expertise, especially when a substantial redistribution of resources is required. Better clinical data to evaluate outcomes and better patient-specific costing data are required. Devolution of services should be addressed in the context of appropriate institutional compensation for medical education.