BACKGROUND: Peripheral neuropathy is a common disorder in which an extensive evaluation is often unrevealing. METHODS: We sought to define diagnostic practice patterns as an early step in identifying opportunities to improve efficiency of care. The 1996-2007 Health and Retirement Study Medicare claims-linked database was used to identify individuals with an incident diagnosis of peripheral neuropathy using International Classification of Diseases, Ninth Revision, codes and required no previous neuropathy diagnosis during the preceding 30 months. Focusing on 15 relevant tests, we examined the number and patterns of tests and specific test utilization 6 months before and after the incident neuropathy diagnosis. Medicare expenditures were assessed during the baseline, diagnostic, and follow-up periods. RESULTS: Of the 12, 673 patients, 1031 (8.1%) received a new International Classification of Diseases, Ninth Revision, diagnosis of neuropathy and met the study inclusion criteria. Of the 15 tests considered, a median of 4 (interquartile range, 2-5) tests were performed, with more than 400 patterns of testing. Magnetic resonance imaging of the brain or spine was ordered in 23.2% of patients, whereas a glucose tolerance test was rarely obtained (1.0%). Mean Medicare expenditures were significantly higher in the diagnostic period than in the baseline period ($14,362 vs $8067, P < .001). CONCLUSIONS: Patients diagnosed as having peripheral neuropathy typically undergo many tests, but testing patterns are highly variable. Almost one-quarter of patients receiving neuropathy diagnoses undergo high-cost, low-yield magnetic resonance imaging, whereas few receive low-cost, high-yield glucose tolerance tests. Expenditures increase substantially in the diagnostic period. More research is needed to define effective and efficient strategies for the diagnostic evaluation of peripheral neuropathy.