OBJECTIVE: To describe the effect of the Vermont Diabetes Information System (VDIS) on hospital and emergency room use DATA SOURCE: Statewide discharge database STUDY DESIGN: Randomized controlled trial of a decision support system for 7,412 adults with diabetes and their 64 primary care providers. DATA COLLECTION/ DATA EXTRACTION: Charges and dates for hospital admissions and emergency room care in Vermont during an average of 32 months of observation. Data from New York hospitals were not available. PRINCIPAL FINDINGS: Patients randomized to VDIS were admitted to the hospital less often than control subjects (0.17 admissions vs. 0.20; P=0.01) and generated lower hospital charges ($3,113 vs. $3,480; P=0.019). VDIS patients also had lower emergency room utilization (0.27 visits vs. 0.36; P<0.0001) and charges ($304 vs. $414; P<0.0001). The intervention was particularly effective in men and in older subjects. CONCLUSIONS: In spite of data limitations that tended to reduce the apparent effect of the system; this randomized, controlled trial showed that VDIS reduces hospitalization and emergency room utilization and expenses.