In the beginning years of professional baseball, there was a bona fide star named “Wee” Willie Keeler. A reporter once asked him his strategy at the plate – what made him such a feared batter. He responded – “I just hit’em where they ain’t”.
When children’s hospitals talk about financial pressure, the conversation invariably centers on labor, reimbursement, or service lines. While these pressures are real, they’re also obvious.
What’s less scrutinized is what’s happening outside of patient care.
A growing share of hospital budgets is quietly consumed by non-clinical categories that rarely receive executive attention. In many pediatric institutions, more than 20% of total net patient revenue sits in this category — largely unmanaged, rarely benchmarked, not strategically sourced, and priced above market norms.
So if you’re looking to relieve financial pressure with strategic cost management in your health system, consider “looking where you currently ain’t”.
Why Are Children’s Hospitals Under Increasing Financial Pressure?
Unlike general hospitals, pediatric institutions face a uniquely fragile economic model: a heavier reliance on Medicaid, a higher proportion of complex, chronic patients, and a commitment to family-centered care that is rarely fully reimbursed. Medicaid provides 37 million children with access to care, with roughly 40% living in rural or small-town communities.
The One Big Beautiful Bill Act is projected to result in nearly 11 million people losing health coverage by 2034 — many of them the very patients children’s hospitals are built to serve. The bill’s most direct threat to children’s hospitals comes through Medicaid financing: states will lose significant revenue from provider taxes, reimbursement rates are likely to fall, and fewer providers in the community will accept Medicaid patients — pushing more complex, underinsured children toward already-strained pediatric facilities.
How Much Do Children’s Hospitals Spend on Non-clinical Categories?
For most health systems, non-clinical categories account for roughly 20% of total net patient revenue. These include:
- Information technology and cybersecurity
- Facilities and maintenance
- Construction, Engineering, and Design Services
- Corporate services
- Marketing and communications
- Human Resources Services and Contingent Labor
- Utilities and infrastructure contracts
Much of this spend is not actively monitored because it sits outside of traditional management structures. GPOs typically cover only a fraction of total non-clinical spend, leaving a significant portion unmanaged. At the same time, long contract cycles create limited competitive tension and allow pricing and terms to drift far from market norms. Compounding the issue, ownership is fragmented across clinical leaders and department heads, with no single, unified view of spend performance.
Limited visibility into cross-industry pricing can leave healthcare providers paying a premium. Our data shows children’s hospitals typically pay 7%–12% more than sectors like retail and manufacturing. Using a disciplined, strategy-driven sourcing approach — supported by category expertise and benchmarking across industries — health systems can erase that premium, achieving substantial savings.
Non-clinical Spend Management in Children’s Hospitals: Why Traditional Cost-cutting Approach Doesn’t Work Anymore
Non-clinical spend has quickly become one of the fastest-growing components of hospital budgets, increasing by as much as 18% YoY.
Children’s hospitals often pay more not because those services are inherently more complex, but because legacy contracts go unchallenged and benchmarking rarely extends beyond healthcare — reinforcing inflated norms rather than revealing fair market value. In pediatric institutions, especially, clinical demands consume executive bandwidth, procurement teams are lean, and ownership is fragmented across departments.
As Charles Weinstein, former SVP of Facilities and Real Estate at Boston Children’s Hospital, observes: “Most CEO, CFO, and COO teams don’t bother to look down to the line items within the non-clinical operations that are deemed ‘requirements.’ Children’s hospitals always want to build newer, bigger, and better buildings, but rarely do departments use their allotted space at peak efficiency.”
Meanwhile, traditional cost-cutting options have largely reached their limits. Reducing clinical staff can drive burnout, cutting specialty programs can weaken competitiveness, and improving the revenue cycle or raising prices can only achieve so much. That’s why reducing non-clinical spending remains one of the few viable paths to deliver meaningful savings without compromising patient care or quality.
How Children’s Hospitals Can Regain Control of Non-clinical Spend Without Impacting Care
Leading health systems are already improving hospital margins through non-clinical spend optimization while mitigating the impact of the One Big Beautiful Bill Act. Retail, manufacturing, and private equity organizations manage non-clinical categories with continuous market intelligence, disciplined benchmarking, and clear governance.
However, most children’s hospitals lack the cross-industry benchmarking data to know where they’re overpaying, the bandwidth to challenge contracts that have gone unexamined for years, and the market leverage to negotiate meaningfully against large, sophisticated vendors. Closing that gap requires seasoned procurement professionals with deep category expertise, cross-industry intelligence, and experience navigating these categories.
Regaining control typically includes:
- Benchmarking non-clinical categories beyond healthcare to compare pricing, terms, and service levels
- Applying the same rigor used for clinical categories to non-clinical spend — focusing on total value, contract structure, and long-term outcomes
- Centralizing visibility across overlooked areas such as IT, facilities, HR, and professional services to enforce structured governance
- Centralizing supplier activity, associated spend, and gaining full visibility on that spend to drive leverage and control
- Challenging legacy contracts and renewal cycles to restore competitive tension and align pricing with market norms
Improving Care Quality with Non-clinical Spend Savings
Children’s hospitals are stewards of both clinical excellence and financial sustainability — and right now, both are under pressure. The opportunity to relieve that pressure is hiding in plain sight.
Non-clinical spend is one of the last remaining levers available. Managed well, it can protect workforce investments, improve margins and care delivery models, and reinvest in the programs that define the mission.
As David Kirshner, former CFO of Boston Children’s Hospital and LogicSource Managing Partner, notes: “Children’s hospitals don’t have a spending problem — they have a visibility and alignment problem. When non-clinical categories are managed with the same discipline as clinical spend, the impact isn’t just cost savings; it’s the ability to reinvest in care delivery, workforce stability, and long-term financial resilience.”
The health systems making progress aren’t doing it alone. They’re partnering with seasoned procurement experts who bring market intelligence, cross-industry benchmarking, and negotiating leverage that internal teams simply can’t replicate on their own.
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