Assessing the Impact of Medical Laboratory Resource Allocations on Hospital Finances

The relationship between resource allocation decisions within medical laboratory cost centers and overall hospital financial performance is empirically investigated using a panel of critical access hospitals in Washington State (2014-2016). In order to increase accessibility to hospital managers and health policy makers, a managerial finance perspective (defining performance using simple financial accounting ratios) is adopted. Results indicate that resource allocation decisions within the medical laboratory cost center have a significant impact on the financial performance of the hospital as a whole. However, the nature of the impact depends on the type of financial metric utilized. For instance, the proportion of the typical medical laboratory's budget that is allocated to rent is negatively and significantly related to the hospital's return on assets. Concomitantly, medical laboratory cost centers that have a larger footprint in the hospital (as measured by square footage) exhibit a significant, positive association with the hospital's current ratio. Thus, physically larger medical laboratories may allow the hospital to better manage its liquid assets.