Rethinking Cost Per Test

Amid the ever-growing need to reduce healthcare costs, including testing expenses, laboratory management must continually pursue operational efficiencies, optimized resource utilization, and interventions for cost reduction. The cost-per-test metric, a fundamental aspect of laboratory management, has long been both pivotal and subject to skepticism. Traditionally, it has served as a straightforward metric for financial evaluation, yet with advancements in analytical technology, it is time to reconsider its role and potential impact.

Current Uses

Let’s delve into some of the existing applications of the cost per test metric, which include:

• Pricing Strategy: Setting individual test prices.
• Driving Cost Reduction: Motivating cost-cutting endeavors.
• Budgeting: Forecasting expenses for budget and resource allocation planning.

One primary concern is that interpreting the cost-per-test data without the proper context can lead to uninformed decisions, inaccurate conclusions, and possible misinterpretations.

New Uses

Leveraging modern analytics and detailed results from the cost-per-test can unlock the ability to analyze laboratory cost data in more depth. By aggregating costs at various levels (test, instrument, department, and laboratory) and employing cross-filtering, similar costs across multiple laboratories can be identified, facilitating comparative analytics. With these reporting capabilities and more, the use of the cost-per-test metric can be significantly broadened to include:

• Performance Optimization: Identifying best practices and inefficiencies by benchmarking values and comparing similar tests within or across laboratories.
• Reagent Efficiency: Highlighting areas for potential cost savings or workflow enhancements through comparative analytics on reagent and consumable costs.
• Quality Control: Gaining insight into the costs associated with control and calibration samples and understanding the opportunity cost due to failed tests by analyzing actual repeat rates. Additionally, combining data from various sources and traditional operational metrics, TAT, for example, can unlock additional valuable information.

Skepticism

It's important to acknowledge and address the skepticism surrounding the traditional use of the cost-per-test metric. Several factors contribute to this skepticism:

• Limited Scope: Calculations may overlook indirect costs or overhead expenses, and the distribution of these costs among different tests may be unclear.
• Lack of Transparency or Clarity: The calculation method for cost per test may lack definition, raising doubts about its accuracy and reliability.
• Variability in Testing Complexity: A uniform approach might oversimplify or ignore the inherent complexities of different tests.
• Limited Value Perception: Without a clear link between cost and value, stakeholders may question the utility of the metric as an indicator of laboratory performance.

To rehabilitate the image of the cost per test metric, these issues should be addressed. This can be achieved through:

• Training and Documentation: Providing clear and transparent documentation and training that outlines the assumptions and variables used in the calculation, educating users and stakeholders.
• Standardization: Ensuring consistency in data acquisition and calculation methods to include all costs and document the cost distribution method used.

Inclusive and consultative workshops can assist in defining methods for handling costs associated with tests of greater complexity.

Conclusion

Addressing these concerns necessitates a holistic approach to cost management that integrates advanced analytics, transparency, and a broader understanding of value creation in laboratory services. By redefining the role of the cost-per-test metric and exploring new applications, laboratories can unlock untapped potentials for performance enhancement and value creation. Stay tuned as we delve deeper into the complexities of cost per test, paving the way for a more robust and insightful laboratory cost management framework.