X Laboratory Cost Accounting

Nongynecological Cytology Practice Guidlines

prepared by the American Society of Cytopathology, Cytopathology Practice Committee.

Adopted by the ASC Executive Board, March 2, 2004


X Laboratory Cost Accounting and Financial Management

Clinical laboratories need to be accurate and realistic in accounting practices if they are to be viable in a competitive market. Financial accounting and cost accounting are separate entities. Financial accounting provides external financial reports for a business entity whereas cost accounting is a measure of the current internal economic state of the business. Cost accounting is an important laboratory management tool for determination of laboratory test pricing. The elements used to calculate the cost of a laboratory test are multifaceted and complex. More comprehensive reviews of cost accounting methods not covered in this document are available including NCCLS Approved Guidelines.97,98,99,100,101,102 Mathematical formulas and computer software programs are also available for this purpose.100,102

Costs are divided into direct, indirect, variable and fixed categories. To ensure an appropriate cost per test all expenses must be captured including preanalytical, analytical and postanalytical components. Direct costs include those items that are readily measurable. Included in this group are salaries with fringe benefits, costs for reagents and consumable supplies, capital for testing equipment, and equipment maintenance expenses. Indirect costs (or overhead) can be more difficult to quantitate than direct costs. Indirect costs include administrative oversight, logistics (couriers and specimen transportation), facilities (real estate, building maintenance, utilities and furnishings), quality assurance, marketing, sales, malpractice and legal expenses and information technology.97,100,102 Indirect costs vary depending on the practice setting such as hospital versus independent laboratory. Variable costs are affected by specimen volume and market variation for suppliers’ costs. Fixed costs are not affected a by change in volume and include such items as rent or mortgage and salaries.

NCCLS recommends that a cost analysis be performed on a biannual basis or when a new test is introduced. Cost analysis is one of many factors that are considered in determining laboratory test pricing. Price is often guided by what the market will bear and should be above the laboratory’s cost for each individual test.

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97     NCCLS, Basic Cost Accounting for Clinical Services; Approved Guidelines, NCCLS document GP11-A, (ISBN  1-56238-356-6) Wayne, PA.: NCCLS; 1998; vol:18  no. 14

98     Coiles R.  Market Outlook Seven Strategies for Tomorrow’s Clinical Laboratories. Health Trends. 2001; 13(5):9-12.

99     Auxter S. The Rebirth of America’s Clinical Laboratory Industry? Clinical Laboratory News, American Association of Clinical Chemistry, January 2001.

100     Paxton A. Bean Counting Basics for Laboratories. CAP Today, 2001; 15(6): 22.

101     Template Topics: Calculating Costs. Clinical Leadership and Management Review, March/April 2001; p. 124-127.

102     “A Systematic Approach to Direct Cost Analysis: The Experience of One Lab with Labor and Supply Cost Allocations”, CLMR Article, ARUP Lab