for clinical laboratory services; therefore, there are no standard data sources or common definitions used for data that are collected. Second, large companies and hospitals often provide other laboratory services in addition to clinical laboratory testing, and these services may be included in aggregate data for laboratory testing.3 Finally, laboratory services are only a small segment of a hospital’s or physician’s business and often are not calculated or are reported separately. Where necessary, this chapter cites several data sources when there is no obvious “right” one. The general direction of the trends described in this chapter is more important than the exact values of various figures.


The clinical laboratory industry is very diverse. Understanding the different types of laboratories, their markets, and the types of services they provide is critical because each has an effect on the cost and quality of laboratory services, as well as beneficiary access to care. This section discusses the number, types, and geographic distribution of laboratories; testing volume; revenue distribution by type of laboratory; and an analysis of the trends in spending for laboratory services in relation to other health care services. It concludes with an analysis of the financial strength of the industry.

Sites of Service

In 1999, 170,102 laboratories conducted 5.7 billion laboratory tests for both inpatients and outpatients in the United States (Tables 2.1 and 2.2). There are three main types of laboratories that provide clinical laboratory services: hospital-based, independent, and physician office laboratories (POLs).

  • Hospital-based laboratories: Hospital-based laboratories conduct more tests than all other types of laboratories combined. They serve primarily the inpatient and outpatient testing needs of their hospital but may also conduct tests for patients not seen at their hospital, typically called “outreach testing.” In 1999, 8,560 hospital-based laboratories (Table 2.1) conducted almost 3 billion laboratory tests (Table 2.2). There are many more hospital-based laboratories than there are hospitals in the U.S. because some hospitals operate more than one laboratory. Independent laboratories run some hospital-based laboratories.

  • Independent laboratories: Independent laboratories conduct tests for physicians, hospitals, and other health care providers. These laboratories tend to be regional in nature, with single companies operating multiple laboratory fa-


For example, data on revenue may include revenue from testing related to life insurance and testing for drugs of abuse.

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