Make versus buy: a financial perspective.

Abstract

Clinical laboratories are often faced with the decision to either perform a service in-house using their own assets or outsource the service to another vendor. This decision affects many aspects of the laboratory's business, from the macroeconomic perspective of outsourcing the laboratory service to a laboratory vendor, to the microeconomics of determining whether to refer a test out to their reference laboratory or perform the test in-house. The basis for decision making includes many variables, but a detailed financial analysis is usually the basis for the decision, especially when the decision only affects the laboratory and not the rest of the institution. Other factors often come into play, and depending on the magnitude, the "make versus buy" decision could be based more on strategic or political factors than economics. Even when noneconomic factors are involved, an effort usually is made to quantify those factors so that the make versus buy decision is reduced to financial terms. The previous article in this issue, "Effectively Managing Your Reference Laboratory Relationship" by Ronald L. Weiss, M.D., focused on the "buy" decision relating to managing the reference laboratory relationship. Although that article took a more clinical perspective through the eyes of the reference laboratory, this article looks at the make versus buy decision from a financial perspective through the eyes of the buying party.