The development and implementation of a departmental performance evaluation system for a correctional managed care pharmacy are described. Health care services for approximately 150,000 offenders within the Texas Department of Criminal Justice are provided through an arrangement with two university systems, the University of Texas Medical Branch (UTMB) and Texas Tech University Health Sciences Center. UTMB provides all distributive pharmacy services through a central pharmacy located in Huntsville, Texas. The pharmacy department distributes 9,000-15,000 medication orders daily to over 140 facilities. Each department within UTMB Correctional Managed Care is evaluated against predetermined quality indicators. This evaluation system is collectively called the operational performance evaluation system (OPES) and is used, in part, to determine pay-for-performance eligibility. Before fiscal year 2001, pharmacy distributive services were provided under a third university system. Joining the UTMB system required the pharmacy department to not only participate in OPES but to develop quality indicators and measurement systems to evaluate departmental performance. Indicators were chosen to reflect a commitment to quality while assuring appropriate productivity in the provision of pharmaceutical care. Seven pharmaceutical care quality indicators were chosen and weighted by perceived importance. A system for data collection, measurement, and reporting was also developed. Implementation of a departmental performance evaluation system provides a means to measure service quality, identify areas of weakness, track performance over time, and lower costs. By setting concrete goals, this system raises awareness and promotes interdependence among department personnel.