OBJECTIVES Tennessee residents face a heavy economic burden of diabetes. Costs of hospitalization and treatment were $2.9 billion in 2003. This study expands on previous work, analyzing race and gender differences in inpatient and outpatient hospital costs for patients with a primary diagnosis of diabetes in Tennessee. We hypothesize that Non-Hispanic Blacks, especially men, bear a disproportionately higher burden compared to Non-Hispanic Whites. METHODS This study utilized inpatient and outpatient files from the 2003 Tennessee Hospital Discharge Data System. Chi-square and t-tests were performed to analyze significant differences in key demographic and clinical factors among race-gender groups. Multivariate regression models were developed to estimate log inpatient and outpatient charges for all hospitalizations with a primary diagnosis of diabetes (ICD-9 code: 250). RESULTS Analyses revealed significant differences in comorbid presentations across race-gender groups and other factors contributing to charges. Overall, women were significantly more likely to present with hypertension than men, although percentages for blacks were significantly higher (all p<0.001). Ulcers were more prevalent in men versus women (all p<0.001), highest among white men (significant only for outpatient events, p<0.001), and resulted in significantly higher (48%, p<0.0001) inpatient charges. As predicted, hospital charges were highest among blacks, although black males had significantly higher (20.2%, p<0.0001) mean inpatient charges and black females had significantly higher (6.8%, p<0.0001) outpatient charges. CONCLUSIONS To improve the quality of care in diabetes, it is critical to identify disparities in treatment. The analysis revealed that a significantly higher percentage of men suffered ulcers, which significantly increased inpatient charges. As such, gender-targeted education may be warranted to reduce the incidence of diabetic ulcers. In addition, increased prevention efforts may be necessary in black communities to reduce avoidable hospitalizations.