Aim: To evaluate the impact on hospital costs of patients being diagnosed with multiple complications of diabetes. Methods: All inpatient admissions and outpatient appointments from the Cardiff and Vale of Glamorgan area (1996 onwards) were cross-referenced to the diabetes register. Each episode of inpatient care was coded using Healthcare Resource Group (HRG) grouper software. The allocated HRG-coded episode was linked to a series of elective and emergency reference costs from the National Health Service costing manual. Outpatient appointments were cost-coded using the mean reference costs by specialty. Non-psychiatric finished consultant episodes (FCEs) were used rather than admissions to report inpatient utilisation. Results: Overall, 2815 of the total 10,287 patients identified as inpatients had at least one admission; 6133 admissions (finished consultant episodes) were successfully grouped to give a total estimated cost of @$7,373,539. An incremental, linear relationship was observed in the cost increases for each additional diagnosed complication. Mean annual inpatient age-standardised costs were @$434 for no complications, @$999 for one complication, @$1,641 for two, and @$2,462 for three. There were 5717 patients with diabetes who attended 25,334 outpatient appointments. The estimated cost for these outpatient appointments was @$1,833,232. Conclusion: Minimising the number of complications in patients with diabetes would result in considerable cost offsets.