Background Medical group practices are central to many of the proposals for health care reform, but little is known about the relationship between practice‐level characteristics and the quality and cost of care. Methods Practice characteristics from a 2009 national survey of 211 group practices were linked to Medicare claims data for beneficiaries attributed to the practices. Multivariate regression was used to examine the relationship between practice characteristics and claims‐computable measures of screening and monitoring, avoidable utilization, risk‐adjusted per‐beneficiary per‐year (PBPY) costs, and the practice's net revenue. Results Several characteristics of group practices are predictive of screening and monitoring measures. Those measures, in turn, are predictive of lower values of avoidable utilization measures that contribute to higher PBPY costs. The effects of group practice characteristics on avoidable utilization, cost, and practice net revenue appear to work primarily through improved screening and monitoring. Conclusions Practice characteristics influence costs indirectly through a set of statistically significant relationships among screening and monitoring measures and avoidable utilization. However, these relationships are not the only pathways connecting practice characteristics to cost and those additional pathways contain substantial “noise” adding uncertainty to the estimated direct effects. Some of the attributes thought to be important characteristics of accountable care organizations and medical homes appear to be associated with lower quality and no improvement in cost.