Diabetes mellitus represents a disease entity that primary care providers commonly encounter in the outpatient setting. Patient visits encompass a broad range of concerns, from optimizing management of hyperglycemia to the sequelae of chronic disease. The third National Health and Nutrition Exam Survey, (NHANES III) 1988-1994 has reported the prevalence of diabetes mellitus type 2 in the U.S. adult population at 12.3%. The cost of diabetes in 1998, estimated at $77 billion, is a formidable challenge to the health care community and third-party payers. Historically, Health Maintenance Organizations (HMOs) have encouraged more preventative tests, procedures, and exams to curtail the development of chronic disease than indemnity plans. The influx of patients of all ages into these capitated plans has spurred such organizations to reconcile cost-conscious initiatives with the expense of chronic disease using treatment algorithms. Aetna U.S. Healthcare (USHC) has developed Healthy OUtlook Programs to manage patients with diabetes using patient education, treatment recommendations, and a U.S. Quality Algorithm (USQA) Diabetes Performance Report for providers. It is not clear whether this program has helped patients with Type 2 diabetes achieve improved glycemic control, receive enhanced screening, and earlier interventions for disease complications compared with indemnity patients. This pilot study seeks to evaluate the effectiveness of managed health care initiatives in improving the quality of care for Type 2 diabetes. In addition, it considers whether differences exist in the care between capitated and indemnity diabetic patients.