Inappropriate laboratory use by physicians is partly responsible for the rapid rise in health care costs. This use falls into three categories--over-, under-, and misutilization. Overuse creates information overload for the physician and has a detrimental effect on patient care. Abnormal results are frequently obscured by massive amounts of requested information. Studies show that laboratory use is greater for younger physicians and that increased use is not associated with better outcome of care. Overuse ranges from 26 per cent to 98 per cent for selected tests. Unnecessary tests can be eliminated with no adverse effect on quality. Laboratory use can be improved by a variety of approaches including education, feedback, implementation of administrative changes and, finally, financial incentives or disincentives; the last has proven the most effective. All the approaches should be reinforced by cost-conscious clinical settings that foster a "why" rather than a "why not" philosophy. Improving laboratory use may reduce costs and maintain quality.