The purpose of this study was to assess physicians' practices in the use of laboratory tests at a public hospital in Egypt, Methods included medical record reviews, interviews with selected physicians, literature review, and cost analysis, Three variables were examined in the medical record: appropriateness oflaboratory tests, laboratory tests performed but not used as a basis for clinical treatment, and laboratory tests requested but not performed, Direct and indirect costs for each test were calculated, Results of the study indicated that 31.4% of the tests were inappropriate, 20.1% of test results were not used in treatment decisions, and 16.3% were mot performed. Inappropriate and unused tests accounted for 22.6% of the annual total budget deficit for the hospital laboratory, To improve the quality of patient care and to decrease the wasteful use of resources, the hospital formed process improvement teams to develop clinical guidelines for problem-prone tests and to improve processes for requesting and providing laboratory results in a timely manner.