Analysis of costs of clinical laboratory tests is as important as the quality indicators of the laboratory practice. Setting the cost per test for the laboratory service is fundamental for the sustainability of the service.
Financial resources are the engine of the healthcare system in the provision of services and one of the main concerns of the public and private sectors executives and managers. As today's healthcare systems are faced with a financial crisis, managers must be able to use the financial resources efficiently while endeavoring to maintain quality.
A long time ago, the test cost was calculated by considering the annual laboratory expenditure divided by the number of tests done, which results in an average cost per test. This requires no technical knowledge of cost analysis and is considered all tests costs are the same, which is obviously not true. In the second, only readily available data are used, usually the cost of reagents and salaries of staff performing the analyses. This method ignores many overhead and indirect costs, which are a major part of the total cost.
To calculate the cost per test, it is essential to grasp the experience of Break-even point (BEP) analysis (The point where earn no profits but make no losses). It is a simple attempt to estimate the volume point at which laboratories can break even. Before considering the calculation of BEP, one should understand the variables to be calculated. They are fixed costs (cost of machines or buildings), variable costs (cost of reagents, and consumables or any input (water, electricity, etc.) to deliver the output of the test result). When these fixed and variable costs are related to a constant price level, a simple calculation and a well-known BEP intersect (see figure).
The volume level of sales at which the product revenues (price × volume) equal the total fixed costs plus the total variable costs (variable cost per unit × volume) is the break-even point. Then, the desired level of profitability can be added to the BEP of the cost per test. This may depend upon the institutions’ policy.
Ali Mouseli, et. al. Cost-price estimation of clinical laboratory services based on activity-based costing: A case study from a developing country, Electronic Physician, 2017;9(4):4077-4083
Broughton, T C Hogan, A new approach to the costing of clinical laboratory tests, Ann Clin Biochem 1981; 18: 330-342
John McGee, Break-even analysis, John Wiley & Sons Ltd, ResearchGate 2014: 1-2
Written by: Giorgis Yeabyo, MS