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Chapter 41 : Finance and Decision Making in Outreach

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Abstract:

This chapter provides background on some basic financial concepts related to operational and strategic decision making in laboratory outreach and the logic behind them. Constant technological innovation characterizes the clinical laboratory to a greater extent than in many other service industries. The frequent changes and improvements in techniques and methods of producing laboratory results create much uncertainty in the acquisition of equipment and material, which may have a relatively fast rate of obsolescence. A product, technology, firm, or industry is said to evolve through phases of development during which aspects of its economics may change. Outreach potentially represents an alternative approach to ensure the survival of the hospital clinical laboratory in the midst of unparalleled industry change. Fixed costs remain unchanged for a given period of time, despite fluctuations in test volume. Service costs are direct costs that are incurred as tests are performed. The amount that either the hospital or the outreach program actually gets paid for a given test is equal to the billed amount minus allowances and bad debt. The budgeting period is very important for capital budgeting. In outreach work, review of capital needs should occur at least annually. Given a decision to acquire a new piece of equipment, the next decisions revolve around determining the least costly financing alternative.

Citation: Bissell M. 2004. Finance and Decision Making in Outreach, p 672-684. In Garcia L, Baselski V, Burke M, Schwab D, Sewell D, Steele J, Weissfeld A, Wilkinson D, Winn W (ed), Clinical Laboratory Management. ASM Press, Washington, DC. doi: 10.1128/9781555817695.ch41

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References

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1. Bennington, J. L.,, G. E. Westlake,, and G. E. Louvau. 1974. Financial Management of the Clinical Laboratory. University Park Press, Baltimore,Md.
2. Beebe, M,, J. A. Dalton,, C. Duffy,, D. Evans,, R. L. Glenn,, D. Hayden,, G. M. Kotowicz,, E. Lumakovska,, M. L. Mindeman,, K. E. O’Hara,, M. R. O’Heron,, D. Reyes,, D. Rozell,, L. Stancik,, A. Walker,, A. A. Watkins,, J. Zacharias. 2002. Physicians Current Procedural Terminology, CPT 2003. American Medical Association Press, Chicago, Ill.
3. Shuffstall, R. M.,, and B. Hemmaplardh. 1979. The Hospital Laboratory; Modern Concepts of Management, Operations, and Finance. The C. V. Mosby Co., St. Louis, Mo.
4. Snyder, J. R.,, and D. A. Senhauser. 1989. Administration and Supervision in Laboratory Medicine, 2nd ed. J.B. Lippincott, Philadelphia, Pa.
5. Travers, E. M.,, D. C. Delahunty,, L. L. Hunter,, K. D. McClatchey,, J. M. Rudar. 1998. Basic cost accounting for clinical services. Approved guideline GP11-A. National Committee for Clinical Laboratory Standards, Wayne, Pa.>
6. Ullmann, J. E. 1976. Theory and Problems of Quantitative Methods in Management. Schaum’s Outline Series. McGraw-Hill, New York, N.Y.

Tables

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Table 41.1

Factors in the decision to make or buy a test

Citation: Bissell M. 2004. Finance and Decision Making in Outreach, p 672-684. In Garcia L, Baselski V, Burke M, Schwab D, Sewell D, Steele J, Weissfeld A, Wilkinson D, Winn W (ed), Clinical Laboratory Management. ASM Press, Washington, DC. doi: 10.1128/9781555817695.ch41

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