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RAVENSWOOD HOSP. MEDICAL CTR. v. SCHWEIKER

May 8, 1985

RAVENSWOOD HOSPITAL MEDICAL CENTER, CHICAGO, ILLINOIS, PLAINTIFF,
v.
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
      disallowed.
  3.  Return on Equity Capital. No
      allowance was made for return on equity
      capital.
  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
      years.
  8.  Bad Debt Allowance. The
      Administrator refused to allow certain
      contractual bad debt allowances claimed by
      Ravenswood in computing reimbursable
      physician's service expense.

Ravenswood filed its complaint for judicial review of the Secretary's decision pursuant to 42 U.S.C. § 1395oo(f) on August 6, 1982. The complaint is framed in eight counts which match the description of disallowed costs set forth above. The prayer for relief of each count requests that the disallowed cost at issue be allowed, that judgment for that amount plus interest be entered, and requests such further relief as the court deems appropriate. Each count of the complaint is considered separately below under the standard of review set forth in 5 U.S.C. § 706 (1978) of the Administrative Procedure Act.

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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