Diagnostic chains · Healthcare
Cost per test and margin for diagnostic chains, centre by centre
A diagnostic chain grows by adding collection points, franchisees and hospital tie-ups. Its margin is decided in the laboratory and on the road between them. We cost each test from reagent to report and each centre from sample to settlement, so expansion follows the locations that earn.
In one paragraph
Pathology and imaging chains, usually at ₹15–400 crore turnover, run a central or regional laboratory fed by owned centres, franchised centres, home collection and business-to-business tie-ups. The shape is hub and spoke. Revenue is collected at hundreds of points, but most cost sits in a few laboratories and in the logistics that connect them. Founders and finance heads, often with the laboratory director, need both halves in one view.
Founder or chief executive, often with the laboratory director and finance head
The economics
How the money moves in this trade
The cost of a test is mostly reagent, controls and calibrators, instrument time and technician time. It varies sharply with batch size. A test run in large daily batches at the hub is cheap. The same test run in small numbers, repeated after a failed run, or consuming reagent that expires half-used, can cost several times as much. Many analysers are placed by suppliers against reagent commitments, which fixes part of the cost whatever the volume.
Revenue comes through channels with very different margins. Walk-in patients come to owned centres, and franchise centres keep a share. Home collection carries its own phlebotomist and travel cost. Hospitals and clinics are billed at discounted business rates on credit. Corporate health checks, packages and sometimes government contracts add more. Shifts between routine and specialised tests change margin far more than headline volume does.
The problem
Where the numbers usually break down
Reagent cost per test is not known
Reagent is expensed as purchased, so nobody can say what a given test costs to run, how much is lost to repeats and controls, or which tests are priced below cost.
Collection-centre margin is not measured
Centres are judged on samples collected. Rent, staff, logistics and the test mix they send are not set against the revenue they bring.
Franchise settlements are computed by hand
Franchise shares, discounts and collections are worked out in spreadsheets, and differences between the billing system and settlements build up month after month.
Business-to-business dues are poorly controlled
Hospitals, clinics and referral laboratories run up credit balances at discounted rates, with little ageing discipline and frequent disputes over rates.
Home collection cost is unallocated
Phlebotomist time, travel and missed appointments are spread across all revenue, so home collection looks as profitable as walk-in business.
What we do
The work, and the result each part produces
Reagent cost per test
Reagent, controls, calibrators and repeats costed per reportable test by analyser, using actual consumption and run sizes.
Every test has a known direct cost to set against its price.
Collection-centre and franchise economics
Revenue, test mix, rent, staff, logistics and franchise share set out for each centre.
Expansion and closure decisions rest on centre-level margin.
Franchise settlement reconciliation
Franchise billing, collections, discounts and shares reconciled with the laboratory information system each month.
Franchise settlements are correct and agreed on time.
Business-to-business credit control
Rate cards, credit limits and ageing by hospital, clinic and referral laboratory, with disputes logged and resolved.
Discounted business revenue is collected on terms.
Home-collection costing
Phlebotomist time, travel, kits and missed visits costed per collection and set against home-collection revenue.
Home collection is priced on what it costs.
Laboratory and logistics reporting
Samples, runs, turnaround and logistics cost reported by laboratory and route.
The cost of the network between centre and laboratory is visible.
Where we start
The first steps of an engagement
LIS, reagent and franchise data
We ask for LIS test volumes by analyser and centre, reagent purchases and run logs including repeats and controls, franchise agreements and settlement sheets, B2B rate cards and the receivables ledger.
Cost per test, busiest first
For the tests that make up most volume, we cost reagent, controls, calibrators and repeats per reportable result by analyser. Each is set against its price in every channel.
Franchise settlement tied to LIS
Franchise billing, collections, discounts and shares are reconciled with the LIS before each settlement. Differences are resolved rather than carried forward.
Test and centre margin report
The first report shows direct cost per test against price, contribution by collection centre and franchise, and B2B dues by customer and age.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Reagent cost per test, by analyser and test
- Contribution by collection centre and franchise
- Franchise settlements reconciled to billing
- Business-to-business receivables by customer and age
- Cost per home collection
- Test-mix contribution, routine against specialised
Who it suits
Written for, and not the right fit for
- You need help with NABL accreditation, laboratory quality systems or imaging licences; those are your responsibility with the accrediting bodies and authorities.
- You want a new laboratory information system selected and implemented; we work with the LIS and billing system you already run.
- Pathology and imaging chains running owned and franchised collection centres.
- Regional laboratories expanding through hospital tie-ups and home collection.
- Diagnostic businesses preparing for investment or acquisition.
Services
Services this work draws on
Costing and profitability
What each product, line and customer really contributes.
Explore service ↗Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗MIS and financial planning
Reporting built around the questions you actually need answered.
Explore service ↗Finance technology and automation
Systems configured around your process, not the other way round.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
Our analysers are on reagent rental. How do we work out cost per test?
The reagent price under a rental deal usually includes the instrument, so the cost per test is the reagent and consumables you actually use, including repeats and controls. That's usually the most important number to get right.
Should we close our weakest collection centres?
The centre-level view shows which centres lose money and why — rent, low volume, or a poor test mix. Some can be fixed; some can't. The decision stays with you.
Do you help with NABL or PCPNDT compliance?
No. Accreditation, laboratory quality and imaging registrations are matters for you, the accrediting bodies and the authorities. We work on the finance side.
5th Quadrant performs costing, reconciliation, credit-control and reporting work. NABL accreditation, laboratory quality systems, PCPNDT registration for imaging and clinical establishment registration are the chain's own responsibility with the relevant bodies and authorities. Statutory audit and tax-audit reports are performed by independently engaged licensed professionals. Full detail is on our Professional Scope page.
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