Any hospital accounting department knows that operating a lab involves many expenditures, such as square footage for lab space, equipment and information technology (IT) systems, reagents, staff and more.

When deciding how to allocate resources and set budgets, however, hospital management should look beyond the upfront costs and take a broad view of the return on investment (ROI).

Smart lab investments, particularly in equipment and manpower, can have a positive impact on hospital profitability by boosting efficiency, lowering turnaround time, reducing error rates, and improving satisfaction for lab staff, physicians and patients. This, in turn, can improve a hospital’s reputation and overall financial performance.

Lab leaders should work with hospital leadership to set budgets and discuss large purchases. Tips to help demonstrate the importance of the lab for overall hospital financial performance include:

• Ask the companies that produce a desired analytical system if they have data on increased efficiency, turnaround time, maintenance, hands-on time, capacity and other system factors that impact profit. Then share the data with hospital financial planners or decision-makers.
• Document specific processes or problems in your lab that you believe are negatively impacting hospital profit. Then present possible solutions that you believe will improve your lab environment as well as hospital profits.
• Study competitors or other local and regional labs to find examples of the impact of different systems on the lab’s performance, reputation or profitability. Look to benchmarking surveys for inspiration and information. 
• Track specific measures that your lab can implement to demonstrate their value to the hospital. Examples include patient volume; test/sample volume; percentage of patients who use the lab services without seeing a hospital physician; turnaround time; time spent fixing, maintaining, and calibrating poor equipment; time spent repeating tests and reviewing for errors due to inaccurate equipment; patient and physician satisfaction survey results; and direct income generation through lab testing services. 

Hospitals that take a nuanced approach to setting up a laboratory for success can find their rewards in better hospital profits—sometimes they just need a lab leader to show them how it’s possible.