Measurement of illness severity is required to evaluate diagnostic efficiency of physicians, assess quality of care, understand utilization of health services, design clinical trials, and reimburse hospitals on the basis of output. "Staging" is a method for measuring severity of specific, well-defined diseases. Staging defines discrete points in the course of individual diseases that are clinically detectable, reflect severity in terms of risk of death or residual impairment, and possess clinical significance for prognosis and choice of therapeutic modality. Medical staging criteria have been developed for 420 diagnoses and converted into "coded" criteria for the major diagnostic coding systems. Coded criteria can be efficiently applied to computerized hospital discharge abstracts to derive a comprehensive case-mix classification system. Uses of staging in epidemiologic, case-mix, and utilization analyses are illustrated for diabetes mellitus.