Meds and labs: are they making or losing you money?

You can't tell whether meds and labs make or lose money until your books record what you collect for them and what you pay for them on separate lines.

Why your books may not answer this yet

When meds and labs aren't set up on their own lines, the money members pay for them lands in the same revenue line as membership dues. The lab invoices and wholesale orders land in general supplies. Both numbers are in the books, but they're mixed with everything else, so nobody can line them up.

Here's a made-up example of how that goes wrong. Say you charge $15 for a lab panel that costs you $17 once shipping and draw supplies are counted. You lose $2 every time you run it, and nobody notices, because the books don't put the two numbers next to each other.

Decide what each one is supposed to do

Before the numbers, decide the goal. Some owners want meds and labs to earn a small margin that helps cover staff time. Others want them priced as a pass-through, meaning members pay close to what you pay and the practice neither gains nor loses. Both are fine choices. Losing money by accident isn't.

Once you know the goal, you know what to look for. A pass-through should come out near zero each month. A margin item should come out positive by about the amount you planned.

How to set it up in your books

This is the setup I'd use. It fits inside a standard DPC chart of accounts.

• A revenue line for medication sales, separate from membership dues.
• A revenue line for lab charges to members.
• A cost line for medication purchases, including shipping.
• A cost line for lab fees, including draw supplies if you want the full picture.
• A note of how you handle meds that expire on the shelf, so that loss lands in medication cost.

If your membership platform collects payment for meds and labs along with dues, the payout report has to be split so each piece lands on its own line. If you use Hint, deposits arrive net of fees, refunds and failed payments, so the revenue gets recorded at its full amount and the fees go on their own line. Otherwise fees quietly shrink what looks like your med revenue.

Reading the numbers once a month

Once the lines are separate, the check takes a few minutes. Here's another made-up example to show the math.

Say you ran 40 lab panels last month and charged members $15 each. That's $600 collected. The lab billed you $12 per panel, which is $480. Your margin on labs for the month is $120, or $3 a panel.

Now say medication sales were $900 and medication purchases were $950, because you restocked a slow-moving item that expired. That's a $50 loss on meds for the month. One month like that isn't a problem. Three in a row means your pricing or your ordering needs a look.

Look at more than one month before you change prices. Med orders are lumpy. You might buy three months of stock at once, which makes one month look bad and the next two look great. A three-month total gives you a truer read.

What to do this week

Pull your three most common labs and your five most dispensed meds. Write down what you charge and what you paid on the last invoice. If any of them sell for less than they cost, fix the price before you fix the books. Then ask your bookkeeper to split meds and labs onto their own lines going forward.

Common questions

Should meds and labs make a profit?
That's your call. Pass-through pricing and a small margin are both reasonable, as long as you picked one on purpose and the books show you're hitting it.

Why does one month look terrible and the next look great?
Usually it's ordering. A big restock lands all at once, so judge meds and labs on a three-month total instead of a single month.

Do card processing fees count against my med margin?
I'd record fees on their own line so you can see them. If you want a fully loaded margin, you can set aside a share of fees for meds and labs when you review.