Are Nonprofit Hospitals Betraying Their Mission?

That's because the government and insurance companies negotiate large discounts off those prices, and the uninsured don't have anyone to negotiate for them.

Virginia Franklin had her wages garnished over a $1,200 hospital bill, even though she was making near minimum wage.

Rehberg says Phoebe Putney's pricing is driven by a unique logic. "The intent is the psychological intent to cause those patients not to come back," he said. "What the hospitals would really like is that those uninsured patients just go somewhere else."

In a separate interview, Wernick countered, "it is not a big secret in Albany, Ga., that Phoebe Putney takes care of everybody who walks through the door."

Living Well

Bagnato and Rehberg say they were even more astonished that while the hospital was squeezing the poor for every penny it could get, it was astonishingly wealthy.

Phoebe Putney made a $34 million profit last year -- tax-free, due to its nonprofit status.

Wernick's compensation package was $600,000, and Phoebe-Putney spent a combined $2 million yearly in travel expenses, according to government filings. A board retreat last year was at the Ritz-Carlton at Amelia Island in Florida.

Phoebe Putney spent $90,000 so executives could check out the company's insurance accounts in the Cayman Islands. And to get there, they chartered a private jet belonging to the law firm of celebrity attorney Johnnie Cochran -- at a cost of $14,000 a day.

When "Primetime" asked about the expenses, Wernick said, "The only time we travel is for business-related purposes and [we] use the most appropriate means to do so."

Bagnato and Rehberg were stunned by what they had discovered, and widened their probe. They found many other nonprofit hospitals have large cash reserves and profits.

Hospital Reacts

The trouble for Bagnato and Rehberg began, they say, when they went public with everything they found about Phoebe Putney. That's when the private investigators showed up.

The hospital acknowledges hiring the men, but denies any intimidation occurred.

Then Phoebe sued Rehberg for racketeering and fraud.

The men had hoped government agencies would investigate Phoebe Putney and come to their aid. But nothing happened.

Only when a small-town lawyer named Dick Scruggs from Oxford, Miss., heard about their struggle, did they find some help.

Scruggs cast a long shadow: He was the first lawyer to successfully sue Big Tobacco.

An Image Issue

When he heard about Bagnato and Rehberg's troubles, Scruggs said, "it just offended my sense of fairness."

He enlisted other high-powered lawyers, including another veteran of the tobacco wars, Randy Hopper, and filed lawsuits against 400 hospitals in 23 states, charging they are hoarding money and violating the purposes of their tax exemptions.

"We think they should do what they've told the government and told the IRS that they're about, which is that they are going to help and treat the needy, not engage in Soprano-like collection practices," Hopper said.

In a statement to "Primetime," the American Hospital Association called the lawsuits "misdirected -- diverting focus away from the real issue of how we as a nation are going to extend health care coverage to all Americans."

Phoebe is among the hospitals being sued, but Wernick says its large profits and cash reserves are a sign of a healthy hospital, and that it would never take advantage of the uninsured.

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