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RAVENSWOOD HOSP. MEDICAL CTR. v. SCHWEIKER
May 8, 1985
RAVENSWOOD HOSPITAL MEDICAL CENTER, CHICAGO, ILLINOIS, PLAINTIFF,
RICHARD S. SCHWEIKER, SECRETARY DEPARTMENT OF HEALTH AND HUMAN SERVICES; AND THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANTS.
The opinion of the court was delivered by: Rovner, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff Ravenswood Hospital Medical Center ("Ravenswood")
brought this action pursuant to the Medicare program (Title
XVIII of the Social Security Act, 42 U.S.C. § 1395, et seq.) to
review a final decision of the Secretary of the Department of
Health and Human Services ("HHS"). The Secretary found that
certain costs claimed by Ravenswood were not allowable costs
for reimbursement by the Medicare program. Jurisdiction in this
Court vests under 42 U.S.C. § 1395oo(f). Presently pending
before this Court are the parties' cross-motions for summary
judgment pursuant to Fed.R.Civ.P. 56.*fn1 No material dispute
of fact exists.
Ravenswood is a 438 bed general, acute care hospital in
Chicago servicing the general population of the City and
Medicare beneficiaries. Ravenswood alleges that it was not
paid the full amount due for services rendered to Medicare
beneficiaries in the fiscal years 1977, 1978, and 1979 because
of the Secretary's determination that certain costs incurred
by Ravenswood were not allowable costs under the Medicare
program. After a several step review process, those costs
which were finally disallowed by the Deputy Administrator,
acting as the Secretary's delegate, of HHS's Health Care
Financing Administration are as follows:
1. Telephone Expenses. All costs
related to patient bedside telephone services
were disallowed as personal comfort items.
2. Hill Burton Costs. Costs associated
with providing free and below-cost services
pursuant to the obligations of hospitals
receiving federal funding under the
Hill-Burton Act, 42 U.S.C. § 291, et seq., were
3. Return on Equity Capital. No
allowance was made for return on equity
4. Labor/Delivery Room Days. The
Administrator ruled that, for purposes of
allocating costs to Medicare patients,
patients in the labor delivery room at
midnight of a given day be included in the
total number of inpatient stay days.
5. Debt Service Fund Interest Offset.
The Administrator ruled that, although
interest income on the fund was not required
to be offset, interest payed on amounts
deposited in the fund should be disallowed.
6. Capitalization of Interest. The
Administrator ruled that Ravenswood must
capitalize, rather than expense, interest
costs incurred during the period in which
construction was in progress and until the
facilities were put into use.
7. Advance Refunding Loss. The
Administrator disallowed the full costs of
the loss in the year incurred and required
Ravenswood to amortize the loss over 23
8. Bad Debt Allowance. The
Administrator refused to allow certain
contractual bad debt allowances claimed by
Ravenswood in computing reimbursable
physician's service expense.
Count I — Telephone Expenses
In Count I of the complaint, Ravenswood requests that
judgment for $96,800, representing the Medicare reimbursement
disallowed for patient telephone service, plus interest, be
entered in its favor. Ravenswood argues that because bedside
telephones for patients have therapeutic value, costs for such
telephone service qualify for Medicare reimbursement under
42 U.S.C. § 1395x(v)(1)(A) and 42 C.F.R. § 405.451. Ravenswood's
argument that it is entitled to reimbursement for these
telephone costs is foreclosed by the decision of the Seventh
Circuit in Saint Mary of Nazareth Hospital Center v. Department
of Health and Human Services, 698 F.2d 1337, 1347 (7th Cir.
1983), in which the court held:
The Secretary's regulation banning the
reimbursement of the cost of a telephone used for
a Medicare patient's personal comfort is clearly
authorized by 42 U.S.C. § 1395y(a)(6). . . . [W]e
hold that the cost of providing a Medicare patient
with a bedside telephone is not a reimbursable cost
under the Medicare program.
Accordingly, the Secretary's decision denying Medicare
reimbursement to Ravenswood for bedside patient telephone
costs is affirmed, and the Secretary is hereby granted ...
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