Case mix has been shown to be of critical importance in studies of effectiveness and quality of care using health outcomes. How these variables are defined, combined, and used to adjust or increase precision in tests for differences in health outcomes has been a source of controversy. Because existing measures were developed to adjust mortality and have marginal relevance for the adjustment of functional status outcomes, especially in ambulatory settings, the authors developed a measure of case (or patient) mix that is specifically designed to adjust functional status outcomes measured in office practice or out-of-hospital settings. This measure, developed as part of Type II Diabetes Patient Outcomes Research Team project, uses patients' reports of symptoms and conditions, as well as patients' ratings of symptom intensity to characterize total disease burden. It differs from other measures of case mix in lack of dependence on diagnoses. Separate measures were developed for each of 15 different disease categories (e.g., chronic lung disease) grouped by body system affected. Within each measure, questionnaire items were combined to rate the severity of that disease on a 1 to 4 scale, according to definitions provided by clinicians. A single, global measure was developed by aggregating the 15 measures, weighted according to the expected impact of each disease category on functional outcomes and disability. In a sample of 1,738 patients, significant relationships were observed between the global case mix measure and functional status, disability days, and service utilization.(ABSTRACT TRUNCATED AT 250 WORDS)