OBJECTIVE: To examine the impact of integrating medical and substance abuse treatment on health care utilization and cost. RESEARCH DESIGN: Randomized clinical trial assigning patients to one of two treatment modalities: an Integrated Care model where primary health care is provided along with substance abuse treatment within the unit and an Independent Care model where medical care is provided in the HMO’s primary care clinics independently from substance abuse treatment. SUBJECTS: Adult patients entering treatment at the outpatient Chemical Dependency Recovery Program in Kaiser Sacramento. MEASURES: Medical utilization and cost for 12 months pretreatment and 12 months after treatment entry. RESULTS: For the full, randomized cohort, there were no statistically significant differences between the two treatment groups over time. However, among the subset of patients with substance abuse related medical conditions (SAMC), Integrated Care patients had significant decreases in hospitalization rates (P = 0.04), inpatient days (P = 0.05) and ER use (P = 0.02). Total medical costs per member-month declined from 431.12 US dollars to 200.03 US dollars (P = 0.02). Among SAMC Independent Care patients, there was a downward trend in inpatient days (P = 0.08) and ER costs (P = 0.05) but no statistically significant decrease in total medical cost. CONCLUSIONS: (Non)findings for the full sample suggest that integrating substance abuse treatment with primary care, may not be necessary or appropriate for all patients. However, it may be beneficial to refer patients with substance abuse related medical conditions to a provider also trained in addiction medicine. There appear to be large cost impacts of providing integrated care for such patients.