BACKGROUND There are many patient dependent factors that determine health care costs. However, it is not clear if the family physicians' background and training affects health care costs. OBJECTIVE To investigate if the family physicians background and training affect their costs. METHODS Included in the study were all the family physicians of Clalit Health Services, Central District according to the following criteria: at least two years work on the same patient list of at least 450 patients, doctors either with specialization in family medicine or with no specialization. The annual costs for treating 1,000 normalized patients (NP) were calculated for each doctor. The doctors' socio-demographic backgrounds were recorded including the country in which they graduated from medical studies, seniority, place of work and managerial position. RESULTS A total of 137 doctors treating 268,453 NP were investigated. The average age of the doctors was 47.4 +/- 8.0 years and on average they had 22.7 +/- 8.2 years of work experience as doctors. Most had graduated in the former USSR (57%), or Israel (20%). Forty percent were specialists in family medicine. We found an 8.7% reduction in health care costs for 1,000 NP over a year when comparing specialists in family medicine to non-specialists (p < 0.01). In multiple regression, the following factors were associated with lower costs: a country practice and specialization in family medicine. CONCLUSIONS The health care costs are reduced by specialists in family medicine when compared to non-specialists. It also appears that costs are lower in non-urban practices. These findings should affect decision makers in the health system in encouraging specialization in family medicine.