Diagnostic Spending Outpaces Utilization, Signaling Lab Management Shift

Routine testing remains the primary driver of diagnostic volume, accounting for approximately 90% of all laboratory activity. Despite this scale, 2025 data shows spending in this category grew by 3.7% while utilization increased by only 0.5%. Much of this inflation stems from site-of-service price disparities, where hospital outpatient settings charge up to 6.8 times more than independent labs for identical tests.

Genetic testing presents a different set of challenges, emerging as the fastest-growing and most complex area of diagnostic medicine. While representing only 15% of total test volume, genetic diagnostics now account for over 30% of laboratory spending. With 10 new tests hitting the market daily and 175,000 options currently available, traditional management methods are struggling to keep pace. Avalon CEO Bill Kerr noted that the industry has reached an inflection point where the focus must shift from basic testing oversight to managing diagnostic complexity. By implementing evidence-based policies and automation, the firm reported $133 million in averted costs for clients in 2025. Moving forward, the integration of AI-enabled diagnostics, novel blood biomarkers, and consumer-generated health data will likely dictate the next decade of laboratory strategy.