The primary policy option that has been suggested to states over the years for shifting care for Medicaid beneficiaries away from hospital sites and toward office sites has been to raise Medicaid fees to physicians on the assumption that this increases the geographic availability of office-based care, which then naturally attracts Medicaid clients away from hospital sites. This study uses Medicaid claims data from the state of Alabama to assess the role of geographic provider availability relative to other factors in families' decisions to select a hospital or an office for an illness visit to a primary care or to a specialist physician. The authors examined the last ambulatory visit for an illness made by continuously enrolled children under age 8 in the first half of 1991. The authors found that both higher Medicaid office practice density and the presence of larger Medicaid office practices were associated with choice of an office for ambulatory care, whereas the presence of larger Medicaid hospital practices were associated with choice of a hospital for care. Controlling for provider availability, hospital users were less likely to have sought previous care for illness during the year, and were more likely to be rural residents, to have traveled away from their home counties for care, and to be eligible for Medicaid through Aid to Families with Dependent Children, rather than through the program's income expansions. We conclude that increased office-based provider availability must be coupled with improved access tor new, remote, and very low income families if Medicaid clients are to be expected to voluntarily shift their choice if site for ambulatory care.