The institution measures the laboratory's success not only for the quality of its services but by its overall financial performance and how effectively it manages the resources allocated to its operation. A budget is an essential tool in measuring and managing financial performance.
There are several functions of the laboratory budget. The expense part of the budget contains the information for justification for the allocation of resources. For example, operating and capital dollars, laboratory personnel, infrastructure support, and space. The budget also contains the information needed to establish charges and project revenue for for-profit laboratories. Many managed care hospitals have outpatient laboratory services and outreach programs for which they can charge, and in this case, revenue projections need to be part of the budget plan.
Before managed care, not-for-profit hospital laboratories based the budget primarily on cost per test versus revenue per test. In the case of managed care hospitals, the impact of the laboratory is more indirect and measured on the laboratory's impact on other areas of the hospital. The laboratory is now evaluated based on things like laboratory costs: cost per outpatient visit, cost per admission, and cost per inpatient day. Any revenue generated through outpatient testing and outreach services is an added benefit. The institution will often set benchmarks in these areas depending on regional or national data and set these as targets for the laboratory. This intensifies the need for careful budget planning and monitoring.
The laboratory manager and section heads are responsible for the careful preparation of the budget. In general, the monitoring of the overall budget is the responsibility of the laboratory manager with input from each section head regarding specific areas of responsibility. An understanding by all involved of the benchmarks and reasons for them becomes a critical part of the financial management of the laboratory.
