Although functional outcome is frequently discussed and written about, it is often not clear what functional outcome is and how it can be measured. This paper introduces the concept of latent and observed measures of functional disability, and distinguishes between disability as a process measure and disability as an outcome measure. Using the Health Assessment Questionnaire as the main functional outcome measure in rheumatoid arthritis, we propose and discuss several methods for determining disability, and describe the implications of altering the disability course.