Core message: Manual diagnostics, point-of-care testing, and analyzer diagnostics have very different cost structures and expected COGS patterns. When they remain blended, changes within one category can disappear inside the total. Separating the three modalities reveals why practices differ and where service mix, purchasing, utilization, classification, waste, or pricing requires attention.
Business Issue
In-House Lab has traditionally been treated as one service line. That structure supported standardized reporting when the range of tests performed inside a veterinary practice was narrower and many practices had limited analyzer capability. The category now combines diagnostic work with very different operating and economic characteristics.
Manual microscopy, rapid test kits, and automated analyzers do not consume supplies in the same way. They do not carry the same vendor relationships, equipment requirements, utilization risk, or pricing considerations. When their revenue and direct costs remain blended, the resulting COGS percentage reflects the practice's mix of services as much as its purchasing discipline or pricing decisions.
Common Misunderstanding
A common misunderstanding is that a lower In-House Lab COGS percentage always indicates better purchasing or stronger pricing. The percentage may instead be lower because manual diagnostics contribute more revenue to the denominator while adding relatively little product cost. A higher percentage may reflect a greater concentration of kit-based or analyzer testing rather than weak management.
The blended percentage remains mathematically correct. The management interpretation can still be incomplete because practices may be comparing different combinations of diagnostic work.
What the Data and Experience Show
Diagnostic testing changed over time
Around thirty years ago, in-house analyzers were far less common in general veterinary practice than they are today. Much of the diagnostic work performed within a hospital relied on direct examination, microscopy, and a smaller set of rapid tests. As analyzer adoption expanded, in-house laboratory economics began to include reagents, calibrators, controls, cartridges, maintenance requirements, service arrangements, and equipment-utilization considerations.
The supplier market changed as well. IDEXX helped establish veterinary point-of-care testing through its SNAP product line in the 1990s and remains a major participant. Practices now also encounter competing rapid tests and analyzer platforms from other diagnostic suppliers. Current vendor competition creates meaningful differences in equipment arrangements, reagent commitments, test menus, workflow, and unit costs.
The accounting category did not evolve at the same pace as the underlying work. A single In-House Lab total can therefore combine a low-consumable manual service with a kit-based test and an analyzer panel that depends on proprietary consumables. The total remains useful for external reporting, but it no longer provides enough detail for many management decisions.
Three diagnostic modalities now define the service line
VizVet Supplemental GL Accounts allow practices to classify in-house tests according to the methodology used to perform the test, rather than the medical purpose of the test. Specimen-collection revenue and directly associated supplies follow the related diagnostic test.
Category | Typical activity | Primary cost behavior | Management question |
|---|---|---|---|
Manual In-House Diagnostics | Ear, skin, and FNA cytology; fecal microscopy; microscopic urinalysis; blood smear evaluation | Slides, stains, collection supplies, and other low-cost consumables | Are manual services captured and priced consistently? |
Point-of-Care Testing | Single-use kits, ELISA-based assays, lateral-flow devices, and similar rapid tests | Test kits, cartridges, cassettes, and other consumable devices | Do test-kit pricing and purchasing produce the intended margin? |
In-House Analyzer Diagnostics | CBC, chemistry, electrolytes, automated urinalysis, blood gas, AI-assisted cytology, and other analyzer-based tests | Reagents, calibrators, controls, analyzer consumables, and equipment-related commitments | Does utilization support the platform's cost and pricing structure? |
The Reframing
The better question is not simply whether a practice's total In-House Lab COGS percentage is high or low. Leaders need to know which diagnostic modality generated the revenue and which direct costs supported it.
A practice that performs a large amount of manual cytology may report a lower aggregate percentage than a practice that relies more heavily on rapid test kits or automated analyzers. The difference may be appropriate. The aggregate ratio cannot identify whether it reflects purchasing, pricing, utilization, service mix, classification, or missing costs. Category detail turns the variance into a question that management can investigate.
Case Evidence from Two Similar Practices
VizVet compared two practices under the same ownership. They used the same PIMS, charged the same client fees, and received the same vendor unit pricing for comparable items. Yet their reported blended In-House Lab COGS percentages were materially different in both years.
Reported blended In-House Lab COGS | 2023 | 2024 |
|---|---|---|
Practice 1 | 28.9% | 34.0% |
Practice 2 | 16.7% | 19.1% |
Difference | 12.2 points | 14.9 points |
Viewed only at the total-account level, Practice 2 could appear to manage In-House Lab costs much more effectively. That conclusion is not supported by the total alone. The practices produced substantially different combinations of manual diagnostics, POCT, and analyzer diagnostics.
Breaking out the revenue into three groups
Cytology and PCV or total-solids revenue were classified as Manual In-House Diagnostics. SNAP and CITE revenue was classified as Point-of-Care Testing. The remaining In-House Lab revenue was classified as In-House Analyzer Diagnostics. This methodology creates a complete three-category revenue view from existing PIMS detail.
Practice and year | Manual diagnostics | Point-of-care testing | Analyzer diagnostics | Total In-House Lab |
|---|---|---|---|---|
Practice 1 | 2023 | $23,321 | $51,170 | $83,891 | $158,382 |
Practice 1 | 2024 | $21,432 | $44,244 | $58,833 | $124,509 |
Practice 2 | 2023 | $156,457 | $69,783 | $383,369 | $609,609 |
Practice 2 | 2024 | $206,285 | $71,750 | $419,671 | $697,706 |
The mix differences are persistent. Manual diagnostics represented approximately 15% to 17% of Practice 1 revenue and 26% to 30% of Practice 2 revenue. POCT represented approximately 32% to 36% of Practice 1 revenue but only 10% to 11% of Practice 2 revenue. Analyzer diagnostics remained the largest category at both practices, ranging from 47% to 53% at Practice 1 and 60% to 63% at Practice 2.
This breakout changes the interpretation of the blended result. Practice 2's larger manual diagnostic share adds substantial revenue with little direct product cost, while its greater analyzer concentration introduces a different reagent and equipment cost structure. Practice 1 carries a much larger POCT share. A single In-House Lab percentage cannot show whether a variance comes from these mix differences or from purchasing, pricing, utilization, or classification.
What Isolated Point of Care Test Costs Reveal
Vendor purchase records made it possible to isolate identifiable SNAP test-kit purchases and match them to the PIMS service group labeled SNAP & CITE. Across both practices and both years, direct kit cost was $63,388 on $236,947 of related POCT revenue, or 26.8%. The four practice-year results ranged from 25.6% to 29.2%, which is far narrower than the differences in total blended In-House Lab COGS.
The practices received the same unit pricing, but their realized POCT cost rates were not identical. Expired tests, tests rerun without a client charge, poor inventory control, waste, complimentary products, and differences between purchase timing and test use can all change the realized result. Separate POCT accounts make those operating differences visible instead of allowing them to disappear inside total In-House Lab COGS.
This purchase-based analysis is not an inventory-adjusted benchmark. Its purpose is to show that the isolated POCT economics are similar even though the practices' blended In-House Lab COGS percentages are very different.
Why It Matters
Separating the modalities helps explain why two practices with the same owner, PIMS, client fees, and vendor unit pricing can report completely different blended COGS percentages. A lower total percentage may look favorable even when the difference comes primarily from a larger volume of manual services. A higher percentage may look unfavorable even when unit pricing is the same and the difference comes from diagnostic mix, expired tests, uncharged reruns, waste, or inventory control.
For an owner with multiple practices, the goal is not to force every location to report the same In-House Lab COGS percentage. It is to understand whether the differences reflect diagnostic mix or an operating issue that requires attention. The same principle applies when comparing one practice with others in a management group: the blended percentage can identify a variance, but the three-category detail is needed before drawing conclusions.
Separating the modalities allows ownership and leadership teams to evaluate:
whether affiliated practices classify comparable tests consistently
whether comparable test types are priced consistently across locations
whether identical unit pricing is producing different realized costs because of expiration, reruns, waste, or inventory control
whether analyzer volume supports the related supply and equipment commitments
whether manual diagnostic services are being charged, captured, and performed consistently
whether an aggregate variance reflects service mix or an actionable operating problem
How VizVet Helps
VizVet's supplemental accounts create matched revenue and COGS streams. The account detail supports internal management reporting while retaining the standard In-House Lab category for external reporting.
Diagnostic modality | Revenue | COGS |
|---|---|---|
Manual In-House Diagnostics | 5311 | 6311 |
Point-of-Care Testing | 5312 | 6312 |
In-House Analyzer Diagnostics | 5313 | 6313 |
For Datalink and other data aggregators that do not recognize the supplemental detail, the three revenue accounts consolidate to 5301 In-House Lab Revenue and the three cost accounts consolidate to 6301 In-House Lab COGS. The supplemental structure adds management visibility without abandoning industry-compatible reporting.
Decision Implication
The three-stream model does not create better information by itself. Practices must classify their PIMS service and inventory items, establish three revenue and three matched COGS subaccounts in QuickBooks, direct related purchases to the correct COGS accounts, and test the mappings. Practices that decide to move forward should refer to the companion Best Practice for the definitions and rationale and the Implementation Guide for the PIMS and accounting checklist.
Once the mappings are reliable, leaders can follow each modality within a practice over time and make like-for-like comparisons across affiliated practices. The consolidated result remains available for each practice's trend and required external reporting, but it should not be used by itself to compare practices because differences in diagnostic mix remain hidden.
Questions Leaders Should Ask
How much In-House Lab revenue comes from manual diagnostics, POCT, and analyzer testing?
Are all locations using the same methodology-based classification rules?
Do similar tests carry materially different prices across practices?
Are reagent, kit, and analyzer consumable costs mapped to the matching revenue stream?
Does each analyzer generate enough volume and margin to support its cost structure?
Can every supplemental account reconcile to the consolidated In-House Lab total?
Bottom Line
Veterinary diagnostics changed while the traditional reporting category remained broad. Manual diagnostics, point-of-care tests, and analyzer diagnostics now represent distinct operating models within the same external service line. Separating them gives practices a clearer view of service mix, pricing, purchasing, utilization, waste, inventory control, and margin. For multi-practice organizations, it also makes like-for-like comparisons more consistent and more useful.
The standard In-House Lab total remains useful for following each practice's own trend and for external roll-up reporting. It is not a reliable standalone measure for comparing practices. VizVet Supplemental GL Accounts make the total explainable and create a path to reliable comparison of matching diagnostic modalities.