Health care outcomes among vulnerable elderly populations (defined in this study as Medicare beneficiaries who rated their overall general health as "fair" or "poor") are a growing concern. Recent studies suggest that potentially preventable hospitalizations may be useful for identifying poor ambulatory health care outcomes among vulnerable populations. To determine if Medicare beneficiaries in fair or poor health are at increased risk of experiencing a preventable hospitalization if they reside in primary care health professional shortage areas. A survey of Medicare beneficiaries from the 1991 Medicare Current Beneficiary Survey. Medicare beneficiaries living in the community. Medicare beneficiaries in fair or poor health were 1.82 times more likely to experience a preventable hospitalization if they resided in a primary care shortage area (95% confidence interval, 1.18-2.81). After controlling for educational level, income, and supplemental insurance, Medicare beneficiaries in fair or poor health were 1.70 times more likely to experience a preventable hospitalization if they resided in a primary care shortage area (95% confidence interval, 1.09-2.65). Medicare beneficiaries in fair or poor health are more likely to experience a potentially preventable hospitalization if they live in a county designated as a primary care shortage area. Provision of Medicare coverage alone may not be enough to prevent poor ambulatory health care outcomes such as preventable hospitalizations. Improving health care outcomes for vulnerable elderly patients may require structural changes to the primary care ambulatory delivery system in the United States, especially in designated shortage areas.