Frost & Sullivan: Transitioning Hospital Laboratories Into Commercially Viable Profit Centers

Dislodging the concept of hospital laboratories as cost centers

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Apr 17, 2012, 08:05 ET

MOUNTAIN VIEW, Calif., April 17, 2012 /PRNewswire/ -- Laboratory analysis of patient specimens is a critical and essential service for any hospital. Despite this vital need, Frost & Sullivan's research finds that in most cases, the profit margin of hospital laboratories is minimal, if non-existent. In fact, in a recent survey of laboratory directors, 67 percent of respondents recognized hospital laboratories in general as cost centers, while 55 percent identified their hospitals as profit centers.

Laboratory directors are being challenged to contribute to, and not drain, their hospital's bottom line. While hospital census for elective procedures has decreased, demand for laboratory screening, diagnostic and esoteric testing has actually increased. Hospital laboratories are finding themselves in a precarious position—the more test services they provide, the more money is lost.

Pathways to profitability exist, derived from strategic relationships with referral laboratories that compound operational efficiencies and support increased revenue from outreach (outpatient) laboratory testing.

If you are interested in shaping this research or participating on a key informant panel, please send an email to Britni Myers, Corporate Communications, at [email protected], with your full name, company name, title, telephone number, company email address, company Web site, city, state and country.

When pursuing a shift in business development strategy, hospitals should begin by assessing their needs to jumpstart the move of their laboratory profit margin from the red to the black. Hospitals can begin by recognizing the dynamic nature of test orders, particularly identifying which tests are profitable and which are loss leaders.

"Additionally, hospitals must distinguish the break-even parameters for screening, diagnostic, esoteric and physiologic tests," said Frost & Sullivan Senior Consultant Virginia Cardin, Dr.P.H. "Outlining these factors is the planning phase of the strategic shift to profitability. Concurrently, laboratories can also assess the benefits of initiating or expanding their outreach (outpatient) services."

On the road to profitability, strategic alliances and joint ventures with reference laboratories continue to demonstrate operational efficiencies, cost savings and income generation opportunities. In the survey, laboratory directors credited these relationships for cost savings, breadth of test menu, and laboratory information system (LIS) connectivity.

This analysis is based on secondary research, interviews with commercial laboratory directors, and web survey responses from laboratory directors representing hospitals with 300 or more beds.

Frost & Sullivan's Healthcare practice enables the optimization, integration, expansion and innovation of revenue streams, competitive positioning and business opportunities. The healthcare analysis encompasses emerging market and technological research as well as growth partnership services.

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Contact:
Britni Myers
Corporate Communications – North America
P: 210.477.8481
F: 210.348.1003
E: [email protected]

http://www.frost.com

SOURCE Frost & Sullivan