Shortfalls in quality of care and rising costs have resulted in a widespread interest in developing strategies that enhance the efficiency of health care delivery. The implementation of multidisciplinary integrative teams of providers is a popular quality improvement intervention designed to manage patients with chronic conditions. However, little attention has been paid to the work environment, which may facilitate organizational change success. Relational climate is a measure of the work environment that captures shared employee perceptions of interpersonal relationships including teamwork, conflict resolution and diversity acceptance. A strong relational climate may improve treatment design, care delivery and process evaluation, leading to better quality and lower costs. This dissertation contains three chapters that seek to understand the influence of relational climate in primary care on quality and costs of diabetes care. Study 1, Relational Climate and Quality of Diabetes Care, measured quality of diabetes care using process-based and intermediate outcome indicators. It assessed whether relational climate was associated with quality of diabetes care. We used longitudinal data (2008– 2012) from the Veterans Health Administration. Multivariate regression analyses accounting for patient, clinic and parent facility characteristics suggested a positive association between relational climate and process-based indicators of diabetes quality of care. Study 2. Relational Climate and Costs of Diabetes Care, evaluated the association between relational climate and costs incurred by diabetic patients differentiating among outpatient, inpatient and total costs. It compared a Generalized Linear Model with the gamma distribution and the log link and a logged model with the Duan’s smearing adjustor. Cost models accounted for quality of diabetes care, besides other patient and clinic characteristics. Results indicated that relational climate contributes to lower outpatient and total costs. Study 3. The Indirect Association of Relational Climate and Costs through Quality, refines the cost-saving estimates of relational climate by accounting for the indirect influence of relational climate on costs through quality. The quality and the cost equations were estimated simultaneously within a treatment-effects model to account for selection bias in treatment compliance. We concluded that a stronger relational climate contributes to lower total costs. The results of this dissertation suggest that improving relational climate is a cost-effective intervention.