Question: Can arthroscopic surgery be used to diagnose osteoarthritis or determine the amount of damage that's there?
Answer: Osteoarthritis is really diagnosed by X-ray, sometimes by MRI, and by clinical exam. The reason to have arthroscopic surgery is if first there's a mechanical derangement that can be diagnosed and hopefully fixed by arthroscopy -- like torn cartilage, or torn ligament. Sometimes with osteoarthritis, you can actually get loose bodies in the joints itself, and then arthroscopy can remove that. Whether or not "cleaning out the joint" from cartilage fraying and debris actually helps is quite controversial in the medical literature.
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