: Health system reform in Ukraine encompasses a series of structural reforms to increase the efficiency of service delivery with the goal of improving the health of the population. Health financing policies based on strategic purchasing of services are used as the levers to overhaul the entire health system. The reform is a political response to a broken Soviet-style system on the edge of collapse, one characterized by low- performance, outdated polyclinics, and underfunded, understaffed, and low-quality hospitals. It relies on inefficient budgeting processes designed to pay for inputs, such as the number of beds, the size of facilities, or number of staff, as opposed to results. Bureaucratic, unmotivated, and low-salaried health workers supported a culture of demanding informal out-of-pocket payments from users of services; such household payments financed up to 53 percent of total health funding. The government is introducing strategic purchasing, contracting arrangements, and e-health systems to change behaviors, foster productivity, increase transparency, and pay for results. In other words, it is reforming the payment system of health services to drive efficiency. The reform is shifting to capitation for primary health care and contracting with hospitals for inpatient hospital services. The newly created National Health Service of Ukraine (NHSU) is a single payer agency and people have a free choice of provider based on the principle of “money follows the patient”. The NHSU has signed capitation contracts with more than one thousand primary health care (PHC) providers and, in the record time of less than a year, almost 28 million people enrolled and signed declarations with a preferred provider. A diagnosis-related group (DRG) payment system is anticipated to result in hospital rightsizing, specialized care mergers, and the elimination of underutilized beds. The new payment system is expected to create the necessary incentives to improve quality, boost performance, and establish a healthier, financially protected citizenry. Effective reform will reduce the burden of disease, control costs, improve wellness, and foster economic growth.