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Objectives This study aims to formulate a cost model from a provider perspective regarding the direct medical costs for diabetic patients who received care in a 30-bed public hospital in Thailand during the fiscal year of 2001. Methods This study is a retrospective prevalence-based cost of illness study. Data were collected by reviewing the medical record of each patient for the whole year. The statistical analysis employed was the stepwise multiple regression method. Results The study covered 186 diabetic patients. It was found that the average cost of caring for a diabetic patient per year was 6331 Thai baht (THB) at 2001 prices (approximately 40 THB=US $1). A major portion of this cost was spent for pharmacy services, which accounted for 45% of the whole cost, followed by outpatient services (24%), inpatientservices (16%), and laboratory investigation (11%). Regarding the model for forecasting the cost, the type of diabetes and its accompanying complications, i.e., hyperlipidemia, cardiovascular accident, hypertension, hyperglycemia, hypoglycemia, gangrene, and diabetic foot, were considered as significant predictor variables (adjusted R 2 = 0.48). The quantitative effects in monetary term of these significant predictors were also demonstrated. Conclusion The results could be beneficial in forecasting the economic burden of diabetes mellitus in Thailand. Furthermore, the results could be used as a financial tool for cost control and disease management at the community hospital level.