Michael E. Porter and Elizabeth Olmsted Teisberg:

The starting point for developing strategy in any field is to define the relevant business or businesses in which an organization competes. Health care delivery is no different. Health care providers do not think of themselves as businesses, but they are in the business of providing services to patients. (Those who are uncomfortable with the notion of businesses in health care can substitute the term service lines.)

The question “What business are we in?” is an important one because it guides an organization’s thinking about who its customer is, what needs it is trying to meet, and how it should organize. Implicit in every business definition is a view of how value is created. Aligning an organization’s view of value with actual value is a precondition for excellent performance.

In some fields, defining the relevant business is straightforward. In health care this is not the case, in part because of the way medicine has traditionally been structured and organized. Many hospitals, for example, see themselves in the “hospital” business or the “health care delivery” business, competing with other hospitals based on their overall service offering. An even broader definition of the business, “health care,” is common among experts in health policy. This leads them to favor large health systems, believing that health care is best organized by combining insurance and health care delivery into one vertically integrated, full-line system.