Health care leaders are setting ambitious cost-cutting goals to fund new resources and care delivery investments. To achieve these goals sooner rather than later, they'll need to target areas of expenditure with the biggest near-term savings potential—which aren't those you might expect.

This study equips nurse leaders to act on the four ripest cost-saving opportunities: reducing premium labor, modernizing outdated care protocols, eliminating supply waste, and restructuring unfavorable contract terms.

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The problem with 'budget-driven' cost cutting

Almost 80% of hospital executives say they're trying to reduce operating costs by at least 5% over the next three years. Many will decide where and how much to cut based on current budget allocation—an approach that puts labor (particularly nursing labor) front-and-center. But this strategy overlooks smaller budget categories where most hospitals will find their best opportunities for near-term savings. Read more.

An 'opportunity-driven' approach changes cost-savings targets

Rather than focusing on big-budget items, hospital executives should target untapped opportunities to reduce spending and evaluate each based on savings potential and applicability.

As the charts below illustrate, this opportunity-driven approach fundamentally alters the cost-cutting conversation and shifts the focus to reducing premium labor, modernizing outdated care protocols, eliminating supply waste, and correcting unfavorable contract terms.

Hospital Operating Costs vs. Largest Cost-Reduction Opportunities

11 strategies for unlocking near-term savings in four key areas

Premium labor

• Bolster accountability for sitter use
   Supporting tool: Baptist Health Lexington's Suicide and Non-Suicide Sitter Duties
   Supporting tool: Baptist Health Lexingtons Sitter Responsibilities
   Supporting tool: Baptist Health Lexington's Sitter Observation Log
• Spotlight incremental overtime
• Hire advanced practitioners as 'nocturnists'

Outdated care protocols

• Reinforce nurse-led sepsis protocols
   Supporting tool: Kaiser Permanente Northern California's ED Screening Tool for Sepsis
• Expand value analysis to standing orders

Supply waste

• Employ supply 'garbage-ology'
• Trade disposable for reusable supplies

Unfavorable contract terms

• Optimize purchased services contracts
• Direct contract for high-cost clinical preference items (CPI)
   Supporting tool: Grassroots Cost Savings Campaign Idea Form
   Supporting tool: Editable Template for a Grassroots Idea Form
• Block physician preference item (PPI) savings leakage
• Close benefits contract loopholes