BACKGROUND: Training in patient-centered medical home (PCMH) settings may prepare new physicians to measure quality of care, manage the health of populations, work in teams, and include cost information in decision making. Transforming resident clinics to PCMHs requires funding for additional staff, electronic health records, training, and other resources not typically available to residency programs. OBJECTIVE: Describe how a 1115 Medicaid waiver was used to transform the majority of primary care training sites in New York State to the PCMH model and improve the quality of care provided. METHODS: The 2013-2014 Hospital Medical Home Program provided awards to 60 hospitals and 118 affiliated residency programs (training more than 5000 residents) to transform outpatient sites into PCMHs and provide high-quality, coordinated care. Site visits, coaching calls, resident surveys, data reporting, and feedback were used to promote and monitor change in resident continuity and quality of care. Descriptive analyses measured improvements in these areas. RESULTS: A total of 156 participating outpatient sites (100%) received PCMH recognition. All sites enhanced resident education using PCMH principles through patient empanelment, development of quality dashboards, and transforming resident scheduling and training. Clinical quality outcomes showed improvement across the demonstration, including better performance on colorectal and breast cancer screening rates (rate increases of 13%, P≤.001, and 11%, P=.011, respectively). CONCLUSIONS: A 1115 Medicaid waiver is a viable mechanism for states to transform residency clinics to reflect new primary care models. The PCMH transformation of 156 sites led to improvements in resident continuity and clinical outcomes.