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 $10181 to $1710 and $9947 to $7800. In contrast, the annual cost of cardiovascular disorders increased from $14485 to $40071 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.