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OBJECTIVE. We assess the effect of variations in the supply and specialty distribution of physicians on admission rates for ambulatory care-sensitive conditions (ACS) and for all causes, and on mortality rates among Medicare beneficiaries of various health care service areas (HCSA). DATA SOURCES. For the Medicare beneficiaries, sources were the Health Care Financing Administration's 1992 enrollment and impatient (Part A) files for a 5 percent sample of that population; for the overall populations and for the medical resources of the HCSAs, the Area Resource File. STUDY DESIGN. This observational, cross-sectional study employed multiple linear regression to assess the influence of population characteristics and of the supply of physicians on hospital admissions, and Poisson regression in the analysis of the factors that affect mortality. PRINCIPAL FINDINGS. Physician supply levels vary nearly fourfold or more when comparing the top and bottom deciles of the HCSAs, Medicare admissions for ACS conditions vary about threefold, and admission rates for all causes and mortality rates vary about 1.5-fold. Physician supply levels and distributions have very little influence on ACS admission rates, and even less on the admissions for all causes and on mortality, except in HCSAs with very low physician supply levels (one-fourth the national average or less). However, these HCSAs account for only about 1 percent of the U.S. population. CONCLUSIONS. Physician supply levels and the proportions of specialists and generalists have negligible effects on health status as measured by mortality rates and by rates of admission for all causes and for conditions presumed to be sensitive to the adequacy of ambulatory care. Reductions in admissions for such conditions are not likely to be achieved through broadening of insurance to levels that exist under Medicare, nor through increases in the supply of physicians, nor, conversely, through a reduction in any presumed oversupply of physicians.