A program was developed for managing diabetic patients within an HMO system. The system uses physician-supervised diabetes nurse specialists and a computer system to enhance compliance and management of patients. The focus of the program is on preventing hospitalizations as well as preventing the development of the complications of diabetes, with early detection (and treatment) of any complications that do occur. The program was associated with a significant fall in glycated hemoglobin levels (12.5% to 9.5%, p < 0.005) and led to likely cost-savings by avoiding acute hospitalizations for diabetes in an estimated 244 patients over a 4-year period.