A Better Financial Focus: Operating Margins

April 8, 2019

A Better Financial Focus: Operating Margins

While most people don't get into the healthcare industry to drive profits, many come to realize—once they're in the industry—that you can't support high-quality care if you overlook the financial realities of the business. This is the case in all areas of healthcare, and it's especially true in health system laboratories, where cost control is critical and operating margins are slim. Here, Jeff Myers, CPA, and Donna Beasley, MT(ASCP)DLM, offer advice on how to optimize your laboratory's finances while never losing sight of your patient-centered mission.

Not Just About Costs

Most laboratories she's worked with, says Beasley, a consultant with Huron Healthcare and a specialist in fiscal viability, could stand to shift their financial priorities. Labs, she notes, have been “incredibly good" at developing lean processes designed to minimize operational costs, but on the “revenue side," there's typically room for improvement. “I like to focus on making sure the lab is collecting every dollar due to them."

Myers, a vice president of consulting for Accumen with more than 20 years of experience in healthcare finance, agrees. It's important to “tighten operations" to control costs, he says, but “cost reduction is not everything." If you look at the long-term strategic plans in place at many healthcare organizations today, he adds, most are concerned with “the unsustainable cost curve," but most also “have some connection to the ability to improve operating margin." Laboratories, Myers suggests, must find ways to “connect a specific value proposition to that strategic initiative."

Article highlights:

  • Optimizing operating margins is critical to success for most health system laboratories.
  • Controlling costs is part of the equation, but revenue generation is also key.
  • Appropriate billing and reporting—and aligning operations with your organization's long-term strategic plan—can all help improve operating margins.


Contributing Lab Leaders

Michelle Barthel

Donna Beasley, MT(ASCP)DLM

Huron Healthcare

Eyas Hattab

Jeff Meyers, CPA

Vice President,Consulting

Corporate Operations




Think in Terms of “Benefit Dollars"

So where should laboratory leaders begin? One way to go about it, according to Beasley, is to turn your attention to clinical variation. “If you're utilizing your IT systems appropriately, and you have approved clinical pathways with reviewed order sets, there is a way to get your arms around the benefit dollars associated that the C-suite will buy into."

Laboratories can also improve operating margins by ensuring the right tests are ordered at the right time. Pathologists, Beasley says, “have to get outside of the microscope and become the doctor's doctor." She's seen organizations where the pathologists accomplish this by accompanying physicians during grand rounds, but they can also monitor test requests through their laboratory management platform. “That involvement is going to be key in a value-based reimbursement system where the length of stay, readmissions, and—obviously—reducing costs are going to be paramount to control."

Billing Matters

Another area where most laboratories could improve involves billing and reporting, Myers says. “It's critically important that as the leader of your laboratory, I can give you a state of the business unit. That's not just quality, that's not just service, it's not just expense. It's what's happening on the bottom line."

Beasley suggests that facilities accomplish this by using lab-specific billing software, or by outsourcing their billing to companies that specialize in optimizing laboratory finances. Instead of leaving billing to the hospital, she says, keep it in the hands of those who know your lab well.

In the end, Beasley and Myers agree that a lab's operating margins are a better measure of success than any metrics centered on costs. Take the necessary steps to get your margins up and you'll have everything you need to focus on what matters most: providing your organization's patients the best service you can.


Additional resources

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