In November 1999, financial losses led the University of California at San Francisco Medical Center (UCSF) to close all inpatient services at Mount Zion Hospital, a community teaching hospital affiliated with UCSF since 1990. As a result of the closure, Mount Zions primary care residency program (MZPC) was merged with UCSFs university-based primary care program. We examined these events in the context of three major currents in U.S. health care: containment of rising health care costs, financial pressures on teaching hospitals, and the shifting priorities in graduate medical education with respect to subspecialty medicine and primary care. As part of this descriptive study, we investigated the impact of the Mount Zion closure on all UCSF internal medicine residents who were in training at the time. Using a cross-sectional survey, we found that a majority of residents felt the closure was harmful to their training, but that reasons varied by program affiliation. Many specific areas of training remained unaffected. Low morale correlated with abandonment of generalist career plans among some primary care residents (p=0.02). We concluded that the perception of harm reflected a temporary reaction to change rather than actual harm to the quality of the programs, and that while attrition from generalism may have resulted from disillusionment by some residents, it more likely reflected a national decline in interest in primary care since 1997. We also concluded that the closure of Mount Zion and its residency program was a consequence of the shifting emphasis toward subspecialization in the U.S. and is a harbinger of further changes in that direction.