Every laboratory director faces the challenge of purchasing new capital equipment or software from time to time. It is often necessary to articulate the need for a purchase from an operational or financial perspective as well as a scientific one. Understanding how a capital purchase will impact the financial and business interests of your organization allows you to make sound decisions and convince leadership to direct funding appropriately.

Justifications for a capital purchase can rely on both financial and non-financial considerations. Starting with the financial perspective, a new capital purchase is typically justified in one of three ways:

Cost reductions

New capital purchases often offer savings once they are in use, perhaps through lower reagent costs or reduced consumable usage. These types of savings are easy to quantify and have a high likelihood of being realized, making them a strong justification. Calculate the ongoing savings on an annual basis, adding in a growth rate if you expect volumes to increase over time.

Labor reductions

A new instrument or process that promises to save time in the lab is an exciting prospect but be prepared for pushback when using this argument to justify a purchase. Every lab has a story about an expensive purchase where the promised labor savings failed to materialize. Come prepared by quantifying exactly how much time will be saved and the associated financial benefit. Additionally, address how that saved time will be put to productive use. In order to actually realize labor savings management needs to either: assign alternate or additional tasks, forego future hiring, or reduce staff.

Replacement or New Capacity

Whether the lab needs to replace an instrument or add an additional one, the key here is to demonstrate a problem with the current state. Data that shows increased downtime, service calls, or poor turnaround times can all be useful. Next, calculate the revenue that is dependent on the instrument. If that’s not possible, consider the cost of sending the testing out. This can justify a new purchase as opposed to retiring the process or assay altogether.

There are also strong arguments for a purchase that are not financial in nature. These include:

Improved Quality

Poor quality poses risks to patients and can lead to delays, excessive repeat testing, and customer dissatisfaction. Involve others to help you make this case. Clinicians, QA personnel, or a client-facing account manager could help confirm a problem exists that needs to be solved.

Regulatory Compliance

Addressing a compliance or inspection risk can justify a purchase quickly. Be careful to only raise a compliance concern in this context if one clearly exists, otherwise justifying a purchase this way could be perceived as dishonest.

Patient Care

Ultimately, improving patient outcomes is the reason clinical labs exist. When there is an opportunity to improve patient care by bringing on a new test or process it should be considered on its own merits regardless of the laboratory financial impact. In many cases, the additional expense to the laboratory results in a much greater benefit to the health system and the patient through an improved outcome.