A DH report on the new public health outcomes framework says setting national goals could mean local authorities overlook 'more important local needs'.
Paying bonuses to local authorities that improve the health of their population the fastest may heighten this risk, it warns.
The framework, launched on Monday, will be used to hold local authorities to account when they take control of public health from April 2013, backed by a ring-fenced budgets worth £5.2bn.
Now, a DH risk assessment for the plans warns that the framework 'may distort incentives and behaviours in undesirable ways'.
'Public health service providers may disproportionately focus their efforts on the indicators presented in this framework, which could have a negative impact on other areas of public health that are important, but outside the scope of the framework,' it says.
The report says the DH attempted to design indicators that are amenable to public health initiatives. This risk can be further reduced if indicators align with wider public health aims, it adds.
But the report admits that some outcomes within the framework may not be attributable to service providers, and may instead be due to external factors out of their direct control, such as population characteristics.
It warned that the framework could be 'discredited' if outcomes are not fully comparable between different local areas due to this problem.
The risk of outlooking local priorities may be 'heightened' if indicators in the framework are incentivised as part of the new health premium, it says. This will reward local authorities based on how much they improve their populations' health.
The framework will need regular and close scrutiny to avoid the risk of creating perverse incentives for local authorities to ignore local priorities, the report concludes.
Ministers had announced on Monday that local authorities' efforts to improve health and reduce inequalities will be judged on whether they improve the length of time people live in good health.
Authors of the influential Marmot report on public health warned in June last year that the health premium idea will disadvantage poorer areas and should be revised.
Commenting on the launch of the public health outcomes framework, Professor Lindsey Davies, president of the Faculty of Public Health, said the country needed a 'robust' public health system for the switch to local authority control to work.
'We need to be confident that the health premium will not mean that vulnerable groups, like homeless people, are penalised for being harder to reach,' she said.
'The Health Bill must make it clear that local authorities will be responsible not only for planning for local outbreaks of infectious diseases like e-coli, but also for making sure they are dealt with properly.
'Otherwise, the public’s health will be put at risk because it may not be properly protected – either in emergencies or in the longer term.'