OBJECTIVE: To examine the relationship between primary care medical home clinical practice systems corresponding to the domains of the Chronic Care Model and annual diabetes-related health care costs incurred by members of a health plan with type-2 diabetes and receiving care at one of 27 Minnesota-based medical groups. STUDY DESIGN: Cross-sectional analysis of the relation between patient-level costs and Patient-Centered Medical Home (PCMH) practice systems as measured by the Physician Practice Connections Readiness Survey. METHODS: Multivariate regressions adjusting for patient demographics, health status, and comorbidities estimated the relationship between the use of PCMH clinical practice systems and 3 annual cost outcomes: total costs of diabetes-related care, outpatient medical costs of diabetes-related care, and inpatient costs of diabetes-related care (ie, inpatient and emergency care). RESULTS: Overall PCMH scores were not significantly related to any annual cost outcome; however, 2 of 5 subdomains were related. Health Care Organization scores were related to significantly lower total (P=0.04) and inpatient costs (P=0.03). Clinical Decision Support was marginally related to a lower total cost (P=0.06) and significantly related to lower inpatient costs (P=0.02). A detailed analysis of the Health Care Organization domain showed that compared with medical groups with only quality improvement, those with performance measurement and individual provider feedback averaged $245/patient less. Medical groups with clinical reminders for counseling averaged $338/patient less. CONCLUSIONS: Certain PCMH practice systems were related to lower costs, but these effects are small compared with total costs. Further research about how these and other PCMH domains affect costs over time is needed.