OBJECTIVES: The cost and management of patients with multiple chronic conditions present unique challenges to the healthcare system. Major chronic conditions such as diabetes often co-occur with other chronic illnesses. The objective of this study is to report the incremental cost of diabetes mellitus when it co-occurs with cardiovascular conditions, depression, hypertension, psychosis, respiratory/asthma, or acid peptic disease. METHODS: A one-year retrospective database analysis using an integrated Medicaid dataset from the State of Oklahoma. Disease states were identified by ICD-9-CM codes and a validated drug-based classification. Patients included in the study had the chronic condition identified by both drug and diagnosis information. The incremental costs of diabetes when co-occurring with other chronic conditions was determined by subtracting the cost of the non-diabetes single condition from the co-occurring disease group. RESULTS: Seven groups of patients consisted of; diabetes only (n=1038), diabetes co-occurring with hypertension (n=313), respiratory illness/asthma (n=62), depression (n=48), cardiovascular illness (n=35), psychosis (n=35), and acid peptic disease (n=30). Diabetes as a single chronic illness had an annual cost of $818 over patients with no evidence of chronic illness. The incremental cost of diabetes when co-occurring with psychosis was $7,211, respiratory illness/asthma $3,161, hypertension $1,595, depression $1,319, acid peptic disease $977, and cardiovascular illness $-35. The incremental cost of diabetes co-occurring with psychosis was significantly higher than all other disease co-occurrences. Differences in the incremental cost of diabetes were not statistically significant between the other disease combinations. ANCOVA was performed with longevity in the program as a covariate to adjust for differential enrollment time. CONCLUSION: The cost and management of chronic conditions such as diabetes may be highly influenced by other chronic conditions the patient may have. Disease management programs may incorporate co-morbidity research and models when evaluating the cost and treatment of chronic conditions.