OBJECTIVE: To determine the medical charges for treating diabetic ketoacidosis (DKA) episodes relative to direct medical care charges of adult patients with type I diabetes. RESEARCH DESIGN AND METHODS: Using data from an electronic medical record system, we identified adult patients with type I diabetes who had received inpatient or outpatient care on at least two occasions between 1 January 1993 and 30 June 1994. Resources and charges for hospitalizations, emergency room visits, outpatient visits, and pharmaceuticals were recorded during this period. One additional year of information was collected to assess the resources and charges associated with multiple DKA episodes. RESULTS: A total of 200 patients were identified, of whom 72 (36.0%) experienced a total of 161 DKA episodes. The direct medical care charges associated with DKA episodes represented 28.1% of the direct medical care charges for the cohort of patients with type I diabetes. The average charge per DKA episode was $6,444. The estimated annual medical care charge for each patient was $7,855 ($13,096 per patient experiencing a DKA episode versus $4,907 per patient not experiencing an episode). Multiple DKA episodes were experienced by 24 (12.0%) of the study patients and accounted for 55.6% of the direct medical care charges for these patients. CONCLUSIONS: DKA episodes represented more than $1 of every $4 spent on direct medical care for adult patients with type I diabetes and $1 of every $2 in those patients experiencing multiple episodes. Interventions that are capable of even a modest reduction in the number of DKA episodes could produce substantial cost savings in a health care system and could be particularly cost-effective in adult patients with recurrent DKA.