three laboratory business principles
language of roi
Speak the language of ROI
The language of ROI is fairly simple. It’s built on the vocabulary of value, and how to prove that your lab provides value on a daily basis. But to achieve fluency, you may have to learn things that weren’t taught in school.
Build a foundation in finance. Your path to fluency begins with building a solid base in hospital finance. Learn about balance sheets and concepts like restricted funds. Get to know your board of directors. Once you can talk finance, you will gain a larger understanding of how your lab figures into the bigger balance sheet of your institution. And remember, mentors are there to help. Reaching out to a seasoned leader, like a COO, can give you invaluable lessons in speaking ROI.
Translate the techno-talk. While you have been trained in the deep technical aspects of science and systems, the C-suite needs it translated into dollar savings, manpower savings, improvements in productivity, and cost avoidance. For example, if a piece of equipment performs more tests per hour, remove it from the operational realm by translating that into the additional revenue that can result from having more patients processed per hour.
Talk growth and be ready to quantify it. Progressive labs across the country have their eyes on growth—gaining new business and growing existing business. Talking growth means talking projections, and that can be intimidating without the right data. To do that, you must know your costs—what your lab is making and losing. Work with your finance department to discover key utilization indicators, like how much revenue is being generated from each billable test. Understand staff expenses, like those of phlebotomists, technicians, and support.
Once you know your costs, you can "lead with growth." You can advocate for funds and resources by confidently projecting increases in revenue, savings, and efficiencies.
Grow your outreach
Increasing your outreach business can provide important benefits for your lab and your institution. Outreach is still a fee-for-service world, and a robust program can increase revenue and fill unused capacity.
Serving this market also requires a new mindset—the willingness to reach out beyond the four walls of a lab to build a rapport with the physician and patient communities. In other words, let them know you are an efficient, cost effective, customer-friendly resource.
Several tactics can help grow outreach. "First, gain administrative support," says Wilson. "Present a business plan that understands the local industry and opportunities based on your operational strengths. Know your lab’s costs and key financial parameters including revenue cycle."
"Second, develop outreach as a hospital program," Wilson adds. "Solicit participation from Registration, Finance, I.T., and Marketing." A program cannot be successful without support from these key operational areas, particularly during program development.
And third, remember that your initiatives must be able to demonstrate volume and revenue growth. "One option is to track outreach by giving a separate and distinct registration code," Wilson says. "This will facilitate tracking of volume and revenues and help secure resources to re-invest in the program."
Service the customer
Traditionally, labs did not judge themselves primarily by the metric of customer service. Those days are over. In today’s competitive environment, the value of your lab relates directly to the patient experience, and those experiences are based on human interactions.
One tactic is to use metrics to monitor call quality, including how many rings before pickup, call abandonment rate, and minutes per call. You can also consider a dedicated outreach professional to handle phone calls and other interactions.
A good rule of thumb is to always observe the “Disney Model”—you and your staff are always on stage, representing your lab. Never lose sight of the fact that while your colleagues may be a captive audience, patients can drop you in an instant.
MovIng forward: the 50% rule
As Wilson concludes, "Each lab administrative director should be spending at least 50% of their time managing operations from a business perspective. Every successful business decision will result in analytical success for the lab." And with these three principles in hand, your lab has a great start. Good luck, and stay tuned for other articles in Take the Lead that will dig deeper into ways to help you increase the value of your lab.
steps for running your lab like a business
- Learn finance: take a course to become familiar with balance sheets, operating costs, revenue projections, and other KPIs
- Find a mentor: take time to consult with your COO, CFO, and other financial leaders in your institution
- Speak the language of value: at the next meeting with your C-suite, limit the techno talk and focus on the value your services and equipment provide to the bottom line
- Do your outreach homework: gain a thorough understanding of local business opportunities as well as your operational strengths before garnering internal support from Finance, I.T., and Marketing
- Service the customer: the patient and physician experience is key to your lab’s success; begin an immediate initiative to improve phone etiquette and review the usability and clarity of your billing and clinical reports