Traditionally physicians have ordered clinical laboratory tests for a variety of reasons. The establishment of a federally mandated prospective payment system for Medicare patients based on diagnosis-related groups has, among other things, necessitated a review of these reasons as well as the level of use of clinical laboratory services for a given diagnosis. Diagnosis-related group payment to hospitals is independent from the number of laboratory studies performed as long as the diagnosis-related group diagnosis is substantiated at the time the patient is discharged from the hospital. The cost-effective utilization of present tests as well as the adoption of new diagnostic methodologies depends on the assessment of whether a test possesses the appropriate parameters to be of sufficient diagnostic value. These factors include sensitivity, specificity, prevalence, speed, and the costs associated with false-negative or false-positive results. The assessment of the diagnostic value of present or future laboratory methods will require careful analysis relative to their financial impact both within the laboratory and for the hospital as a whole. The laboratory's knowledge of the diagnosis-related group accounting for the highest percentage of their hospital's costs, the highest volume of their cases, and the highest use of their services can aid in assessment of the appropriateness and level of laboratory services. An analysis of the percentage of microbiology costs associated with these diagnosis-related group categories for a large, tertiary care hospital is discussed.