Please help with the name of this movie

I saw this movie about 10 or 15 years ago. It was about a group of demons that lived in a city that was built beneath a graveyard. There is an evil group and a bunch that are not evil, although I don;t remember the whole story. I am sure it was a made for TV movie, but as I remember the special effects were kind of cool. In one scene, a guy is in the hospital and he (it's kinda gross) cuts his face off so he can become one of the "demons" which he does. He comes back to help the main character. It ends with the townsfolk destroying the entire underground city and most of the demons. Some of them escape and search to start a new city somewhere. Does anyone have a clue what movie this is? I have been looking for it for a while now.
Thanks for your help.