The increase in both the numbers of physician office laboratories (POLs) and the range of tests they offer may have significant impact on hospital laboratories. Their profitability already weakened by prospective payment systems, hospital laboratories face a serious competitor in physicians' offices. Concerns about the quality of testing performed in POLs do not seem to be impeding their growth, but are stimulating various regulatory or legislative proposals, which would remove some of their economic incentives. Physicians will always need referral laboratories, and hospitals will need to cultivate this market by improving services to physicians. One such service--consultation by hospitals' clinical laboratory staffs--has the added feature of helping to improve the quality of POLs.