The 1st Strategic Conference of the European Federation of Clinical Chemistry and Laboratory Medicine proposed a simplified hierarchy for setting analytical performance specifications (APS). The top two levels of the 1999 Stockholm hierarchy, i.e., evaluation of the effect of analytical performance on clinical outcomes and clinical decisions have been proposed to be replaced by one outcome-based model. This model can be supported by: (1a) direct outcome studies; and (1b) indirect outcome studies investigating the impact of analytical performance of the test on clinical classifications or decisions and thereby on the probability of patient relevant clinical outcomes. This paper reviews the need for outcome-based specifications, the most relevant types of outcomes to be considered, and the challenges and limitations faced when setting outcome-based APS. The methods of Model 1a and b are discussed and examples are provided for how outcome data can be translated to APS using the linked evidence and simulation or decision analytic techniques. Outcome-based APS should primarily reflect the clinical needs of patients; should be tailored to the purpose, role and significance of the test in a well defined clinical pathway; and should be defined at a level that achieves net health benefit for patients at reasonable costs. Whilst it is acknowledged that direct evaluations are difficult and may not be possible for all measurands, all other forms of setting APS should be weighed against that standard, and regarded as approximations. Better definition of the relationship between the analytical performance of tests and health outcomes can be used to set analytical performance criteria that aim to improve the clinical and cost-effectiveness of laboratory tests.