Objective. To evaluate the effect of a diabetes-management program for patients with type 2 diabetes and related comorbidities on acute healthcare utilisation and costs. Methods. This was a retrospective administrative dataset analysis using data for patients enrolled from 2007 to 2008. Inpatient admissions for diabetes-related conditions were compared before, during and following enrolment. Costs per episode were estimated from Weighted Inlier Equivalent Separations (WIES) funding. A cost model was then developed based on admission rates per 100 patients. Results. Data were retrieved for 357 patients; 49% males, mean age 62 years. The mean per-patient cost of the program was AU$524 (s.d. $213). The mean cost of an inpatient admission was $4357(95% CI 2743–5971) pre-enrolment and $4396 (95% CI 2888–5904) post-enrolment. Following program completion the annual costs (per 100 patients) for managing ‘diabetes with multiple complications’ and hypoglycaemia decreased from $10 181 to $1710 and $9947 to $7800. In contrast, the annual cost of cardiovascular disorders increased from $14 485 to $40 071 per 100 patients. Conclusions. In the short-term diabetes-management programs for patients with comorbid vascular disease may reduce hospital utilisation for diabetes but not for cardiovascular disease. Longer-term follow-up is needed to determine whether intensive management of vascular complications can reduce costs. What is known about the topic? Type 2 diabetes is now recognised as the fastest growing chronic disease in Australia and other western countries. In developed countries, diabetes is a leading cause of cardiovascular disease and renal failure, and, in the over 60 age group, is a leading cause of blindness and non-traumatic lower limb amputations. Glycated haemoglobin (HbA1c) is a measure of diabetes control, with set target levels for the prevention or delay of development of macrovascular and microvascular complications of diabetes. Epidemiological studies have demonstrated that a 1% reduction in HbA1c can lead to a 15–21% reduction in diabetes-related deaths and 33–41% reduction in microvascular complications over a 10-year period. Indicating that improvements in glycaemic control may have the potential to decrease acute healthcare costs associated with management of complications over the long term. What does this paper add? There are limited data available on the short to medium term effect of disease-management programs for patients with already established complications on acute healthcare utilisation. This study evaluated the cost of providing the Northern Alliance Hospital Admission Risk Program for diabetes disease management and its effect on acute healthcare utilisation at Northern Health. In contrast, the overall inpatient costs for the management of diabetes and related conditions were high and did not decrease significantly following program completion. The major acute care cost drivers were surgical interventions for advanced peripheral vascular disease and the management of cardiovascular events. What are the implications for practitioners? These findings demonstrate that in this population with a high prevalence of established cardiovascular and peripheral vascular complications that diabetes-management programs need to be equipped and resourced to manage these complications if potential savings in acute care costs are to be realised.