Are Nonprofit Hospitals Betraying Their Mission?

Charles Rehberg, a business manager at a small surgery clinic in Albany, Ga., was leaving the office one evening last August when he says he was suddenly confronted by two men.

They said they were ex-FBI agents who had been hired to investigate him, Rehberg said. He said they told Rehberg they wanted him to go with them, but didn't say where.

When he refused, Rehberg said one of them told him: "If you're not smart enough to do this for yourself, you should think about your wife, Wanda, and your lovely family."

Rehberg knew why they had come. He and another physician at the clinic, John Bagnato, had been investigating the finances of Phoebe Putney Memorial Hospital, a local nonprofit institution. Now the two men were there to investigate him on behalf of the hospital.

Nonprofit hospitals get a tax exemption for helping the community, but critics say some are instead engaging in "uncharitable practices." The probe Rehberg and Bagnato began would eventually open hundreds of other nonprofit hospitals across the country to scrutiny.

What they found was that at the same time as Phoebe charged uninsured patients -- often working poor -- full and extremely high prices for care received, and then used legal but aggressive collection practices to collect their debts, the hospital was sitting on millions of dollars of cash reserves and made tens of millions in profits.

The men alleged that Phoebe's actions were more common among nonprofit hospitals than most people think -- that the hospitals were taking advantage of the uninsured.

Turning Over Stones

Phoebe is in many ways the crown jewel of the small city in which Rehberg and Bagnato live. It's widely recognized for its community service and its first-class care.

Bagnato is Phoebe's chief of surgery. Several months ago, he asked his office manager, Rehberg, to research a business plan for his practice. They discovered the hospital was flush with millions of dollars, and they say the hospital was often victimizing those people it was supposed to help.

Uninsured patients who entered Phoebe Putney would be called upon to sign a form guaranteeing payment in full when they left. And then when they couldn't pay, the hospital would pursue even the poorest patients with aggressive collection practices.

"When you see people who come to the hospital in need and they leave only to be preyed upon by these exorbitant bills, frankly it's ethically wrong," Bagnato told ABC News' "Primetime." "And I think it's morally corrupt."

1,000 Percent Markup

James Michael Paul says he had no insurance when he went to the hospital in severe pain.

He says doctors took several X-rays, a process that took an hour and 15 minutes, told him there was nothing wrong, and sent him on his way. The bill was $3,000.

He says it was loaded with shockingly high charges. For example, one charge was $1,200 for a dye injection. The manufacturer's list price is $110.

Phoebe's chief executive officer Joel Wernick told "Primetime" the hospital's prices don't "reflect the actual cost in the same way as the services that are being provided." In other words, the $1,200 reflects more than the cost of the material -- it also involves its distribution and use.

But still, the uninsured have to pay these charges. At a private hospital across town, an insurance company would have paid about $700 for the same procedure.

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