# How to Calculate Cost Per Reportable Test

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The cost per reportable test is a very important number to small medical labs. Often, a sales representative will quote a certain “cost per test,” but these estimates often do not take into account overhead expenses such as maintaining the lab and paying employees. There are three types of costs to take into account: fixed costs, labor costs and variable costs. Adding these three up will help you to determine your true cost per test. Fixed costs and labor costs have specific formulae, but you will need to assess and determine variable costs yourself.

## Direct Costs

Make a list of everything that you need to perform a single test. Include all of your supplies, including things such as cotton swabs or paper towels for cleanup; even though these items are very cheap, their costs can add up over time.

Dig through your invoices to find the unit price, or price per single item, of each thing that you use. For example, if you use one syringe per test and syringes cost \$30 for a pack of 15 syringes, then your unit cost of syringes is \$2 per syringe.

Add up the unit costs of everything that you use to perform one test to find your total test cost. If you used one syringe at \$2 per syringe, three vials at \$1 per vial, and 2 cotton swabs at \$0.02 per swab, your total test cost adds up to \$5.04 per test.

Keep track of the number of test kits or supplies that you use for a long period of time (at least a month). The longer you keep track of the number of tests that you do, the more accurate your cost per reportable test will be. For 20 tests, your total for supplies would be \$100.80.

Subtract the number unusable or unreportable tests from the total number of tests that you did. If you did 20 tests and only one was un-reportable, your total is 19 reportable tests.

Divide the total cost of all the supplies that you used for all the tests (reportable and unreportable) by the number of reportable tests that you performed. For this example, divide \$100.80 by 19 to get \$5.30. This is your direct cost per reportable test.

## Labor Costs

Measure the amount of time that it takes your employees to complete your test from start to finish. Time them repeatedly over a long period of time to get an average that approximates the time spent per test.

Calculate or find your employee’s hourly salary and divide that by 60 to find your employee’s salary per minute. For example, if you pay a nurse \$45 an hour to do these tests, her salary per minute is \$0.75.

Multiply the number of minutes it takes to perform a test by your employee’s salary per minute to find the labor costs for your test. If it takes your nurse 20 minutes to do one test, then your labor costs \$15 per test.

#### Tips

• Variable costs include the cost of calibrating a machine or the cleaning costs that inevitably come with an increased patient volume. You will need to track these factors yourself and add them to your total cost per reportable test.