Due to resource scarcity, every health system worldwide must decide what services to fund, and conversely, what services not to fund. In order to institute and refine a macro-level priority setting framework within a large, urban health authority in Alberta, Canada, researchers and decision makers together embarked on a participatory action research (PAR) project. The focus of this paper is the PAR process in this context, including reflections from PAR participants about the contribution of the research methodology to their own practice as health care managers and clinicians. The use of qualitative research in health economics--in this case, to refine the application of a macro-level priority setting model--is a relatively new advancement. PAR proved to be an appropriate and helpful approach to introducing a theoretically driven model of macro-level priority setting within a large, complex health organization. However, it is important that support for the change is sustained as long as necessary to embed the new practices into the organization.