Lab Testing: the Money Talk

Feb. 5, 2018

Bugs & Drugs discusses the delicate issue of clinical lab finances: both the lab and hospital leadership must connect the dots and determine what tests best fit the interests of the patients and the hospital.

Clinical microbiology labs assist in diagnosing infectious diseases by using appropriate technologies in a timely and accurate manner. In an ideal world, a fully staffed lab could bring in and implement every one of the cool gadgets needed. As laboratorians, we never stop pursuing the best technology or test—the one with high performance (sensitivity, specificity, precision, accuracy), fast turnaround time, high throughput, minimal hands-on time and multiplex capability. The reality? There is a cost for everything, and improvements in technology have to be balanced against that cost.

The cost analysis for a test is not as straightforward as one may think. It is a common misconception that the cost of a test is just the cost of the reagents. In fact, the cost of the salary for the technician time spent on specimen processing, performing the test, analyzing the result, and reporting the result is the biggest expense for most tests. It is therefore not surprising that automating a test or lab process can save money in the long run by reducing the time spent on the test.

Over the past decade it has become popular to acquire new tests, including instrumentation, by reagent rental instead of capital purchase. A reagent-rental program is based on an agreement between the vendor and the lab on a sustainable test volume, aka reagent supply cost, that the laboratory will order over a period of time, with the purchase cost of the equipment being waived. Essentially, the lab may borrow the equipment as long as they keep purchasing reagents. In contrast, a capital purchase is a one-time payment for the equipment with no commitment to purchase a specific amount of supplies for the test. Reagent rental may allow better cash flow, particularly for technologies with high capital costs that are revised and improved frequently. This model also makes it possible to bring in new technologies when capital is not available. On the other hand, a capital purchase is mostly used for equipment with mature technology, long lifespan, or low run cost, such as matrix-assisted laser desorption/ionization time of flight mass spectrometry (MALDI-TOF MS). A calculation of the break-even point and return on investment is especially important before making a capital purchase. In addition to the equipment and supply cost, the cost for service and maintenance cannot be neglected. A typical service contract covers the transportation of the field engineer, labor, and parts, and the cost of such contracts are highly variable and depend on the complexity of the equipment. Last but not least, the cost of running quality controls and validation of sample types, usually done on each lot and each shipment, can be substantial in multiplex molecular assays. These cost components can be easily calculated or estimated, but when the lab cost is anticipated to rise in order to improve clinical quality of care and patient outcomes, the analysis gets more complicated.

Recently introduced molecular technologies can accurately diagnose infections with reduced turnaround time , promote antimicrobial stewardship and improve clinical outcome with reduced length of hospital stay. While these are all great examples of how the microbiology lab contributes to and improves patient care, the primary question of resource allocation remains. It is pretty obvious that while performing a molecular assay costs more than a conventional culture assay, the rapid and accurate results of such a test can reduce the expense in other departments, such as pharmacy and infection control, by facilitating earlier identification and control of multidrug-resistant organisms and better antimicrobial stewardship. But does the cost saving from reduced vancomycin use or patient isolation rooms get reflected in the lab's budget? Rarely, if at all. It is the responsibility of both the lab and hospital leadership to connect the dots and determine what tests best fit the interests of the patients and the hospital. The involvement of stakeholder departments, such as infectious diseases, pharmacy, the emergency department, and quality improvement, is always helpful when it comes to the clinical and financial analysis.

While clinical needs are typically the primary driver in the selection of an expensive diagnostic test, the cost justification must include anticipated benefits to both the patient and the institution. There is a fine line between providing the best patient care and overworking the lab (physically and financially), and it is our job as clinical microbiologists to find the balance.

Author: Siu-Kei (Jacky) Chow

Siu-Kei (Jacky) Chow
Siu-Kei (Jacky) Chow is the Technical Director of Infectious Diseases Diagnostics at MultiCare Health System in Washington. He is a diplomate of the American Board of Medical Microbiology. He is interested in emerging infectious diseases, antimicrobial resistance, workflow optimization, and drawings of microorganisms.