Finance and Decision Making in Outreach

This chapter provides a background on some basic financial concepts related to operational and strategic decision making in laboratory outreach and the logic behind them. As a business, the clinical laboratory shares the economic characteristics of both a service business and a manufacturing industry. Fixed costs constitute a large proportion of overall cost in a typical clinical laboratory. This fact has implications for certain key decisions, such as those involving analyses of cost, volume, and margin interrelationships. Ideally, a hospital clinical laboratory's decision about whether or not to offer a given test on its test menu should be driven by objective evidence of clinical need, by perceived patient benefit, and ultimately, by measures of patient outcome associated with the test's use. Given a decision to offer a test as part of the laboratory's menu, the next decision is whether to set up the new test in‐house or to send it out to a reference lab. Given a decision to “make,” i.e., produce test results inhouse, the next decisions involve the use or acquisition of any capital equipment that may be involved. Given a decision to acquire a new piece of equipment, the next decisions revolve around determining the least costly financing alternative.