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Tax-Exempt Hospitals' Practices Challenged

Little progress has been made since.

Gerard Wages, the hospital's chief operating officer, said in a telephone interview that since word of the tentative agreement got out, North Mississippi has seen its volume of charity care jump, with patients traveling from outside the region for care and some locals "bypassing other hospitals." Some area businessmen have also told him they or their workers were considering dropping insurance to take advantage of the reduced rates in the settlement, he added.

Wages acknowledged that Scruggs's firm has discussed ways to temper those developments, but no final decision has been made.


The nonprofit North Mississippi Medical Center in Tupelo is exempt from federal, state and local taxes by providing care to "charity patients." (C. Richard Cotton For The Washington Post)

For people such as Kathy Millican, 50, nothing has changed. After an emergency hysterectomy, she was flooded with bills totaling more than $11,600, she said. With her husband making $12 an hour hauling rocks, the best Millican and her mother-in-law could do was send in periodic checks for $50 or $100.

Bill collectors began calling at odd hours, suggesting she put it all on a credit card or deliver a bank note. After her second request for charity care, the hospital forgave $700 but added $1,000 in finance charges. Last week, she delivered a large plastic bag bulging with medical bills to Scruggs's office and joined the lawsuit.

"I knew they wanted their money, but I didn't know how I could get blood out of a turnip," she said.

Now Scruggs, whose triumph over the tobacco industry was depicted in the movie "The Insider," is back on war footing. From his offices above Oxford's historic square, he coordinates a legal team that includes some of the best-known trial lawyers in Chicago, San Francisco, New York, Atlanta and Missouri.

"This is like moving a mountain," he said during a pause in a blur of conference calls, meetings and even a photo opportunity.

Detractors say the hospital suits are just Scruggs's latest money-and-publicity grab. It is noteworthy, they say, that he has yet to win a round in court. So far, the judges have concluded "it's between those institutions and the revenue service," Mitchell said.

The board chairman boasted that North Mississippi provided $26 million in charity care last year.


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