Responding to changes in health care financing, government policy, technology, and clinical judgment, and the rise of managed care, hospitals are shifting services from inpatient to outpatient settings and moving them into the community. Institutions are evolving into integrated delivery systems, developing the capacity to provide a continuum of coordinated services in an array of settings and to share financial risk with physicians and managed care organizations. Over the past several years, hospitals in New York City have shifted considerable resources into ambulatory care. In their drive to expand and enhance services, however, they face serious challenges, including a well-established focus on hospitals as inpatient centers of tertiary care and medical education, a heavy reliance upon residents as providers of medical care, limited access to capital, and often inadequate physical plants. In 1995, the United Hospital Fund awarded $600,000 through its Ambulatory Care Services Initiative to support hospitals' efforts to meet the challenges of reorganizing services, compete in a managed care environment, and provide high-quality ambulatory care in more efficient ways. Through the initiative, 12 New York City hospitals started projects to reorganize service delivery and build an infrastructure of systems, technology, and personnel. Among the projects undertaken by the hospitals were:--broad-based reorganization efforts employing primary care models to improve and expand existing ambulatory care services, integrate services, and better coordinate care;--projects to improve information management, planning and testing new systems for scheduling appointments, registering patients, and tracking ambulatory care and its outcomes;--training programs to increase the supply of primary care providers (both nurse practitioners and primary care physicians), train clinical and support staff in the skills needed to deliver more efficient and better ambulatory care, prepare staff for practicing in a managed care environment, and help staff communicate with a culturally diverse patient population and promote the importance of primary care within the community. Significant innovations and improvements were realized through the projects. Several hospitals expanded the availability of primary care services, trained new primary care providers, and helped patients gain access to primary care clinicians for the first time. Better methods for documenting ambulatory care were introduced. To increase efficiency and improve service to patients, some of the hospitals instituted automated appointment systems and improved medical record services. To reduce fragmentation and contain personnel costs, support staff positions were redesigned, and staff were retrained to carry out new multi-tasked responsibilities. Many of the components vital to high-quality ambulatory care can take years to develop, and significant investments of capital. Increased primary care capacity, new specialty group practices, state-of-the-art equipment for diagnosis and treatment, advanced information technology to manage and coordinate care and link services at multiple locations, and highly trained clinical and support staff all require strong commitment and support from a team of senior management executives and medical staff leaders, sufficient staffing resources, and outside expertise. Once the infrastructure is in place, hospitals must continue to reach out to their communities, helping people to understand the health care system and use it effectively.