Medicaid claims data were used to compare the costs and care quality of ambulatory visits for two childhood illnesses, urinary tract infection (UTI) and suppurative otitis media (OM), in the fee-for-service Medicaid program in Alabama across three care settings: offices where patients had been seen before, offices where patients had not been seen before, and outpatient hospital departments. Forty percent of UTI visits and 46 percent of OM visits occurred in return office settings. Visits to outpatient hospital and first-time office settings were more expensive than those to return office settings, due to the billing of facility fees and the provision of additional services. Adherence to common measures of quality of care for both types of visits was low; 52 percent of UTI visits included urine cultures and 40 percent of OM visits included recheck visits. Adherence to these quality measures was significantly lower in visits occurring in hospital settings.