Ambulatory care services have been reorganized in a New York City hospital. A newly developed Neighborhood Family Care Center (NFCC) replaced the outpatient clinics. The NFCC and both inpatient and emergency services are totally integrated so as to overcome many of the deficiencies that previously existed in ambulatory care, such as inferior quality of care, minimal academic involvement, fragmentation of services, overspecialization, and unresponsiveness to patients' needs. A review of all patients admitted to the Adult Medical Service has shown a statistically significant decrease in admission rates for diabetic coma-acidosis, severe hypertension, congestive heart failure, cerebrovascular accidents, and severe asthma during the 18 months following the reorganization of ambulatory care. Analysis of cost effectiveness of these changes on the utilization of hospital beds indicates the potential for reduced expenditures of limited health care dollars.