The use of clinical laboratory tests has more than doubled during the past decade. Some observers of the health system feel that this growth is excessive and is a result of current payment systems. This article examines the effects of current reimbursement policies with regard to the use of laboratory tests and prices charged for tests. The results suggest the following: The method of financing medical care, including cost sharing and prepaid group practice arrangements, affects the volume of laboratory testing through the number of patient contacts with the medical care system rather than through the number of tests used per patient contact. Fee ceilings on physician time appear to be partially offset by higher test prices. Cost-based reimbursement for hospital services is associated with higher charges in hospital laboratories.