SICK OF HOSPITAL BILLS

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The Georgians tried to enlist government authorities to their cause but failed. Then Bagnato called an old medical-school friend from Mississippi, David Merideth. Also a lawyer, Merideth suggested talking to Scruggs and asked Bagnato to write up his findings, at that point encompassing dozens of hospitals, in a letter. "I knew we were onto something really good when I gave Dickie the letter and he kept studying it," Merideth recalled. Scruggs was outraged by the accumulation of hospital wealth and seemingly abusive collection efforts. "He wouldn't give it back to me for a while," says Merideth. "When he finally did, he said, 'Wow.'" Two weeks later, Rehberg and Bagnato chartered a plane to Mississippi and presented their research to Scruggs, including tales of conflicts of interest, of executives paid to head both the hospital and for-profit subsidiaries, and plenty of stories of aggrieved patients. By June, the suits were flying. "These hospitals claim they're charities but operate like for-profit businesses," says Scruggs. "We aren't challenging hospitals that are going broke."

Some veterans of the health-care business say the lawsuits are misguided. "Nonprofits can't deliver health care to their community by losing money," says Stephen Shortell, dean of the U.C. Berkeley School of Public Health. Moreover, to folks who do physically and emotionally draining health-care work, the notion of hospitals' hoarding their wealth and targeting the poor is insulting. "There's a lot of outrage over the suits," says Stephen Weyl, a New Hampshire lawyer and hospital-industry consultant.

In fact, many hospitals are revising their charity policies. In California, Sutter Health--a 27-hospital chain accused of spending less than 2% of its revenues on charity care--enhanced its policy last year, giving free care to patients earning up to 200% of the federal poverty guidelines. Provena has broadened its charity-care eligibility, and the AHA has been urging its 4,700 member hospitals to sign new charity and billing guidelines. Scruggs has already notched one victory. In Mississippi, the nation's largest rural hospital system settled with him last month, agreeing to provide an estimated $270 million in debt relief and discounts for patients, even though it wasn't sued. Scruggs calls the deal with North Mississippi Health Services a model, and says he would drop his challenges to hospitals that agree to similar terms.

So far, Bagnato and Rehberg have got nothing but trouble for their efforts. Bagnato says he's being "shut out" from surgery business decisions at Phoebe and suspects the hospital of "politely but pointedly directing patients away from Albany Surgical and me in particular." Phoebe calls that claim abhorrent. But Bagnato is convinced, "If they could get away with firing me, I think they would." Rehberg, who filed counterclaims against Phoebe last week, now has the same security guard who protected Jeffrey Wigand. "Given a choice," Rehberg says, "I prefer to sit in back and observe. But I can't quietly tolerate injustice." Neither, apparently, can Scruggs. --With reporting by Anne Berryman/Albany, Alice Jackson-Baughn/ Jackson and Leslie Whitaker/Chicago