Introduction to Laboratory Finance: The Key to Sustainable Operations
November 7, 2023Understanding the Data: What Should I Consider?
November 21, 2023Breaking Down Laboratory Finances: Origins and Allocations
As mentioned in the preceding post, laboratories constitute an integral component of the healthcare system. To ensure the sustained operation and maintenance of these facilities, prudent financial management is imperative. In this post, we will delve into the origins of financial inflow and where the funds go.
Income
Depending on the laboratory's nature, whether it is privately or publicly owned or affiliated with an academic institution, funding can originate from a diverse array of sources. These sources may encompass government grants, financial backing from various government agencies, financial support from academic institutions or parent universities, and philanthropic donations from nonprofit organizations. The primary revenue stream for a laboratory predominantly stems from providing core services and diagnostic tests at a cost.
Expenses
In the realm of effective laboratory financial management, cost control plays a pivotal role. Therefore, it is critically important to understand all expenses, their sources, and their classifications.
You will find various methodologies for categorizing expenses if researched online, with most of these tailored to specific purposes. For instance, when calculating the cost per test, terms like direct and indirect costs emerge. Direct costs pertain to expenses directly associated with a specific test, such as reagents or consumables essential for conducting that particular test. In contrast, indirect costs encompass general operational expenses like rent and utilities. Laboratories encounter a distinct challenge as a substantial portion of their tests share expenses across analyzers and clinical disciplines.
Understanding this dynamic may necessitate the relook of the direct and indirect categorizations. One approach could involve differentiating between staff costs and other operational expenses. Within the Operational category, further subcategorization into overhead costs, material costs, and equipment costs can provide a solid foundation for comparative analytics across various clinical departments or sites. Additional subdivision of operational costs can enhance the granularity of reports, facilitating in-depth analyses.
Typical Laboratory Costs
Staff Costs
The bulk of staff costs consists of salaries and wages for laboratory directors, researchers, medical scientists, pathologists, technicians, and support staff. Additionally, staff costs encompass associated benefits such as health insurance and retirement plans.
Operational Costs
Using the previously detailed categories, we can identify the following standard expenses:
Overhead Costs
These include non-clinical expenses, if they apply organization-wide or to a specific site. Overhead costs encompass facility-related expenditures like rent, maintenance, utilities (electricity, water, gas, HVAC). Also include expenses for cleaning, gardening, vehicle rentals, maintenance, uniforms, and stationery. Other non-clinical expenses relate to safety, compliance, outreach, education, and administrative costs.
Material Costs
This category should cover all clinical consumables and reagents. Further subdivisions can include reagents, consumables, controls, and calibrators. Analyzing the cost of controls and calibrators can yield valuable insights into the cost of quality.
Equipment Costs
All costs associated with equipment, whether through rental or amortization of new acquisitions, fall under this category. Include repairs and maintenance contracts here.
As mentioned in the previous post, laboratories often prioritize clinical quality and service delivery, relegating financial and cost management to a secondary role. Setting up cost categories to facilitate the desired level of granularity will support proper cost data analytics. Rigorously applied, these analytics becomes a powerful tool for identifying resource misalignments and setting test price points while promoting a data-driven long-term growth strategy.
