Passing the Test

Financially healthy veterinary practices work to optimize the profitability of their on-site laboratory services. However, ongoing debate centers on whether in-house labs are better than sending samples to an outside lab. And what are clients willing to pay for diagnostic tests? If you think a quick-fix “vaccine” exists — a one-and-done shot to improve your lab’s bottom line — think again. Turning your lab into a growing profit center requires a multimodal approach. So, let’s get started.

Understanding your lab’s revenue and expenses is the first step. Accurate, detailed financial data highlights profitable tests and identifies cost inefficiencies. Compare your data points and year-over-year changes to industry averages.

The benchmark percentages shown below are from the American Animal Hospital Association’s most recent Pulsepoints report.

• Laboratory revenue as a percentage of total revenue (14%)
• Laboratory expenses as a percentage of total revenue (5.3%)
• Laboratory revenue-to-expense ratio (2.9-to-1, with the most profitable at 5-to-1)

Some industry publications combine lab diagnostics and imaging. For example, iVET360’s 2024 Veterinary Industry Benchmark Report found lab, imaging and diagnostics accounting for 23.4% of revenue.

Dr. Nan Boss, the owner of Best Friends Veterinary Center in Grafton, Wisconsin, has lectured at veterinary conferences about wellness and disease prevention for 25 years.

“In that time, the percentage of hospitals offering wellness lab screening has only increased from 9% to 14%,” Dr. Boss said. “So many missed opportunities to catch diseases early and so much lost income.”

By analyzing revenue streams, such as seasonal fluctuations and the tests that generate the most income, practice leaders can make informed, data-driven decisions about where to focus their efforts. The emphasis could range from altering prices and adding bundled options to negotiating lower costs with suppliers and sending particular tests to outside labs.

Without such foundational knowledge, trying to make your lab more profitable might be misguided and ineffective.

Inside vs. Outside

Should you run point-of-care tests or send samples to a reference lab? The benefit of one versus the other might depend on client perceptions and your capabilities. While pet owners likely know little about state-of-the-art lab technology and lab accreditation, they understand their relationship with your practice and their level of trust in your team’s recommendations. A lack of confidence can lead to poor compliance.

When weighing whether to operate an on-site lab or go with an outside service provider, consider how much training your team needs, the cost of maintaining equipment, and what you pay for supplies, contracts and equipment upgrades.

Dr. Jan Bellows of Hometown Animal Hospital and All Pets Dental in Weston, Florida, noted that some outside labs offer customized profiles at prices much lower than in-house tests. On the other hand, some companies provide free lab equipment and dental X-ray units to practices that commit to a multiyear contract. Another promising addition to a clinic’s offerings can include machines that use artificial intelligence for the instantaneous analysis of fecal and urine specimens.

Many veterinary practices offer inside and outside lab services, but the combination doesn’t guarantee profitability. Ask your attorney to review the fine details in purchase agreements and maintenance contracts.

Better Efficiency

Improving an on-site laboratory’s operational efficiency involves process optimization, technology integration and team training. The first step is to analyze workflows to identify bottlenecks and redundancies. Next, update or create standard operating procedures. For example, Dr. Boss attaches the ear cytology computer code to the ear cleaning and examination code because skin scrapes and other cytologies are essential. That simple adjustment reduces the chance of not testing a patient or not charging for the test.

Next, train your employees. A well-educated team is more adept with advanced diagnostic equipment and laboratory technologies, leading to quicker turnaround times and more reliable results. This step boosts productivity and reduces errors and costly retests. Furthermore, ongoing professional development keeps the team updated on industry trends and best practices, enabling your lab to offer cutting-edge services that attract more clients.

Dr. Kathryn Primm, who owns Applebrook Animal Hospital in Ooltewah, Tennessee, said team members are less likely to recommend a test if they don’t understand its value or lack confidence in performing it. She discovered that some of her employees weren’t comfortable reading fecal flotations, so they would pull a doctor aside to verify the findings. To save time, they sent some fecal tests to an outside lab.

Dr. Primm recommends internal parasite flashcards published by the Companion Animal Parasite Council. The app lets her team members quiz each other, building confidence.

Finally, invest in technology. For example, an online portal can provide client access to a pet’s lab results and medical records, enhancing communication. In addition, software integration between lab equipment and the practice management software can automate the reordering of supplies and allow for easier tracking and reporting of test results.

Additional Services

To understand trends and seasonal fluctuations, study your PIMS report for the number of lab tests performed on-site and by outside labs. The knowledge will help you better understand inventory management, marketing and pricing strategies. In addition, reevaluate or replace underutilized tests and consider offering services your competitors might not provide, such as genetic testing, allergy testing and advanced imaging.

If your practice is the only one locally that offers a lengthy menu of diagnostic services, look into collaborating with other clinics to become a referral test center, significantly increasing your lab’s profitability through sheer volume. In addition, referral partnerships with pet stores and animal shelters can create a steady stream of lab work.

Strengthen the Client Bond

Effective client communication starts with promptly delivering test results with understandable explanations and actionable recommendations. Allow pet owners to receive results in their preferred manner, whether by phone call, text message, email or an online portal. Additionally, educational content about the importance of diagnostics will help clients appreciate the value of your lab services, leading to more frequent testing and preventive care.

A loyalty program can also foster repeated business and improve client retention. Loyalty programs reward pet owners for their patronage through discounts, special offers and exclusive services, creating a sense of appreciation and value. Loyal clients are more likely to refer other pet owners to your practice, optimizing your laboratory as a crucial profit center.

The Price Is Right

Competitive prices and bundled services can enhance an in-house lab’s profitability and build client satisfaction. By analyzing market rates and setting prices that provide value and maintain a competitive edge, a practice can position its lab services to attract cost-conscious clients without compromising quality. Combining multiple diagnostic tests into a health package provides convenience for pet owners and encourages higher pet-visit spending. Together, competitive pricing and bundled services create a compelling value proposition, fostering client loyalty and boosting an on-site lab’s profitability.

Turning an in-house lab into a growing profit center requires understanding your revenue and expenses. Investing in training ensures your team is equipped with the latest skills, driving efficiency and client satisfaction. Expanding diagnostic services and adopting the latest technology meet pet owners’ growing demands and position your lab for improved profitability. Finally, implementing competitive pricing and bundled services adds value, which attracts and retains clients.

If you’re ready to try, your in-house veterinary lab can achieve sustained profitability, ensuring its long-term success and superior patient care.

BIG BUSINESS

A Business Research Company report forecasts the worldwide market for veterinary laboratory testing services to reach $84.43 billion in 2025, a year-over-year increase of 8%.

STORY ARCHIVE

Check out these peer-reviewed articles on diagnostic testing from Today’s Veterinary Practice:

• “Immune-Complex Dissociation for Heartworm Diagnosis” go.navc.com/3YL2HKS
• “At-Home DNA Tests: Crystal Ball With a Caveat,” go.navc.com/dna-TVP
• “Diagnostic Testing for Tick-Borne Diseases,” go.navc.com/4gHe6B4