CAPHLD
Whitepaper

THE PUBLIC HEALTH LABORATORY METHOD OF TEST COST DETERMINATION:

A starting point for test costs determinations should be reagents and materials. Public health laboratory reagent purchases that occur among several laboratories may lead to a discount unit price that will be an advantage.

The PTV system is a valid and accurate method to determine variable cost and to estimate a break even or nonprofit cost/test. However, this system is not particularly helpful in dealing with all competitors unless certain factors are taken into consideration.

One should not compare the cost of a PTV unit to the cost of some other type of unit, i.e. CAP unit, until every factor used to calculate the unit price is defined and accounted for.

Public health laboratories operate using standard procedures. They are in the public sector, and have a public trust. Therefore, a public health laboratory may be underbid because it quotes what is found to be a fair price based on the break-even estimates derived from the PTV system.

In using the PTV system to compare with competitors, consider the following:

Reevaluate the PTV's needed to perform a test in your laboratory, especially your high volume tests.

Start with using the PTV only as a procedure minute not an absolute cost per minute.

First estimate the test cost for materials only.

Calculate the test by a minute of bench worker time; use this to arrive at a PTV test cost. The overview estimate of budget total PTV cost is an average. It may be too high for some procedures and too low for others.

 

OUTSIDE CONTRACTORS

One may argue that by sending the work out that all public health laboratory overhead is eliminated so the tests can be done more cheaply elsewhere. The facts are quite different:


County and departmental overheads, exclusive of the public health laboratory, will continue regardless. These overhead cost may be in the range of 15-20% and are spread out over remaining organizational units.

Regional commercial laboratories are not able to perform rabies, waters, foods and other related environmental services for which there are no fees or revenues. The same is true for food

borne disease or other communicable disease outbreaks. The health officer must decide when to call on laboratory services to investigate outbreaks which generate a cost to the department that is not reimbursable.

There would still be some laboratory overhead for a health department to maintain a laboratory for certain services and not others. What would be the point of sending work out and changing the infrastructure of California Public Health for a serious, but hopefully temporary, budget problems? More importantly, why jeopardize the health of the public?

Operating the public health laboratory helps to pay for itself and provides a revenue center for positive cash flow unlike most other programs in public health.

A departmental laboratory also maintains a close working relationship with communicable disease investigators and epidemiologist at a level a commercial laboratory cannot. Examine the track record of your bidders in the State mandated reporting of laboratory test results for communicable diseases under Section 2505. Determine if they show 100% reporting in a timely manner as you do.