As resources in health care are scarce, health authorities and other health organizations are charged with determining how best to spend limited resources. While a number of formal approaches to priority setting within health authorities have been used internationally, there has been limited success with such activity, particularly across major service portfolios. This participatory action research project instituted a novel priority setting framework, coined macro-marginal analysis (MMA), in a fully integrated urban health region in Alberta, Canada. The focus of MMA is on identifying areas for service growth and areas for resource release, then determining, based on pre-defined, locally generated criteria, if actual shifts or re-allocation of resources should occur. For fiscal year 2002/03, the Calgary Health Region identified over 40 M dollars in resource releases (approximately 3% of the total budget), which were made available for servicing the deficit, and more importantly for our purposes, re-investing in service growth areas. The MMA framework is pragmatic in nature and has the ability to incorporate relevant evidence directly into the decision-making process. This work constitutes a significant advancement in health economics, and responds where previous priority setting approaches have failed in that it allows decision-makers to achieve genuine re-allocation of resources with the aim of improving population health or better meeting other important criteria.