Although Americans pay much more for a day in the hospital than Canadians, we know little about whether inpatient physician practice patterns might explain some of this difference. The authors compared the utilization of all diagnostic imaging (plain radiographs, computed tomography (CT) and magnetic resonance imaging (MRI) scanning, ultrasound, nuclear medicine and vascular studies) and selected laboratory tests (hematology, basic bio-chemistry, and advanced biochemistry) for all patients discharged with selected medical and surgical diagnoses in 1990 and 1991 from four university hospitals and four community hospitals in Canada (n = 6,491) and the United States (n = 7,980). Overall, US medical patients received 22% more diagnostic tests than their Canadian counterparts (544.2 relative value units [RVUs] vs. 446.5 RVUs in Canada, P < 0.001), which was mainly the result of higher radiology use. Although mean radiology use was 40% higher in the United States (370.0 vs. 264.5 RVUs in Canada, P < 0.05), there was little difference in the use of laboratory tests between countries (174.2 vs. 182.4 RVUs in Canada, P = 0.3). Within radiology, only CT and MRI use differed significantly between countries (US patients received 119% more tests than Canadians). These findings were consistent after adjustments for age, gender, diagnosis-related group, and university status. Differences in test use between countries were mainly the result of more testing among the US elderly than counterparts in Canada. Among surgical patients, there was little difference between countries for radiology (76.3 vs. 67.3 RVUs in Canada, P < 0.05) and laboratory (83.6 vs. 91.4 RVUs in Canada, P < 0.05). Comparable inpatients admitted to US hospitals received more diagnostic tests than their Canadian counterparts even in hospitals with similar availability of technology. Difference between countries were larger for high-cost tests than for lower-cost tests. Much of the difference in test use is explained by more intensive use for the elderly in the United States.