This study is a continuation of an earlier study that examined hospitalization rates for ambulatory care sensitive (ACS) conditions, as a proxy for quality of care, and found evidence of a racial disparity among African American and White Medicare beneficiaries. The current study sought to determine whether neighborhood socioeconomic status (SES) explained this disparity. Differences in rates of ACS hospitalizations by race were assessed using Cochran-Mantel Haenszel tests and Poisson regression. Unadjusted rate ratios for ACS hospitalization for African Americans vs. Whites were found to be higher in low poverty areas (rate ratio (RR)=1.13; 95% CI (1.08, 1.17)) than in high poverty areas (RR=0.97; 95% CI (0.89, 1.05)). After controlling for various indicators of area SES in multivariate analyses race differences in ACS hospitalization rates persisted. Rural neighborhoods and those with higher percent of non-high school graduates were associated with greater risk of ACS hospitalizations