This is a rush transcript from "Hannity," July 22, 2009. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: Now, earlier this week, we send our own Ainsley Earhardt to Chicago to investigate allegations of patient dumping that have rocked the University of Chicago Medical Center. Now, the former administrator at the heart of this controversy is none other than first lady Michelle Obama. Let's take a look.


AINSLEY EARHARDT, FOX NEWS CORRESPONDENT (voice-over): Before you buy into Barack Obama's universal health care plan, you might want to hear about a little known medical program key members of his administration started on Chicago's South Side. It's called the Urban Health Initiative, and it's been stirring up quite a controversy in the Windy City.

The program began in 2006 as the brainchild of first lady Michelle Obama when she was the VP at the University of Chicago Medical Center.

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Its mission? To provide quality care to the area's poor and streamline the hospital's E.R. by directing non-emergency cases to nearby clinics. Despite numerous phone calls and e-mails to the medical center, we were denied interviews with any of the program's employees, but we did talk to a former student at the university's medical school who was familiar with the initiative.

DR. JIM JIRJIS, DIR. OF PRIMARY CARE AT VANDERBILT: This program helps by helping to identify people who are using the emergency room in ways that really aren't appropriate because they have no other options. And it helps with those patients with a far superior patient-centered medical home model. That's the biggest win/win situation there is because the patient benefits, and the health care costs go down, but it requires some investment.

EARHARDT: To get that investment, Michelle Obama, along with close friend and future Obama adviser Valerie Jarrett, hired — you guessed it — Obama spin doctor David Axelrod. He began to wage the initiative's PR Campaign. It worked. The good press surrounding the program helped the hospital win $23 million grant. And even today, the initiative continues to be the beneficiary of government funding. It received $190,000 from the omnibus spending bill, which is on top of the more than $50 million in tax breaks the hospital is given every year.

But now, critics are asking whether redirecting patients helps the poor or the hospital's bottom line.

(on camera): The program certainly provides the university physicians here a convenient way to focus on their wealthy patients and pushed the uninsured out the door.

(voice-over): Last year, 12-year-old Dontae Adams was attacked by a pit bull. His motherimmediately took him to the university's emergency room. However, the staff was more interested in her insurance provider, she says, than they were in treating her soon. After learning she has Medicaid, Dontae was promptly redirected to a hospital an hour away.

The incident caught the attention of the American College of Emergency Physicians early in 2009. They issued a scathing press release, criticizing the Urban Health Initiative, saying, quote, "This is a dangerous precedent that could have catastrophic effects in poor neighborhoods across the country."

A few months later, a 78-year-old Medicare patient died in the waiting room after nurses failed to register him for almost four hours.

Unfortunately, these experiences are far from uncommon. The Chicago Tribune reported that 32 percent of patients redirected from the university's E.R. are poor or uninsured. And people we interviewed outside local clinics said the university would be the last emergency room they would visit.

CORRINE FOSTER, SOUTH SIDE RESIDENT: I know several people that have a personal experience. It took them a long time to see him, even just to register him. It took a long time for that and it was an excruciating pain.

LAMONICA MCKINNY, SOUTH SIDE RESIDENT: Before I go to the University of Chicago, I would think of other hospitals that are probably further out of the area which the University of Chicago is like one of the closest hospitals to my home, I would pass them and go somewhere else.

EARHARDT: According to community activist Shannon Bennett, this has led to a backlash among South Side residents.

SHANNON BENETT, KENWOOD-OAKLAND COMMUNITY ACTIVIST: We hear about the university is saying as their purpose of what they want to do. And we see something different. And what see different is that how they leave them out in the cold.

EARHARDT: He's also skeptical of the program's claim that patients directed away from the hospital are receiving better care at local clinics.

BENNETTE: They are not getting better care. And part of what the issue is that, these clinics are usually staffed by the county, and to my understanding, that service, of course, is nothing comparable to what you're going to get at the University of Chicago.

EARHARDT: Health care professional David Catron has spend over 25 years in the business and agrees with Bennett's assessment.

DAVID CATRON, HEALTHCARE CONSULTANT: The Urban Health Initiative is not about charity. It's about reserving beds in the University of Chicago Medical Center for well-heeled, well-insured patients.

EARHARDT: In fact, he goes even further, calling the initiative a patient-dumping scheme, a practice outlawed by President Reagan back in 1986.

CATRON: If it doesn't violate the letter of the law, it certainly violates the spirit of the law. It is patient-dumping.

EARHARDT: So, what's the potential fallout? A similar practice was exposed in L.A. three years ago, when surveillance videos caught a hospital kicking homeless patients out into the street. Using that as an example, the university's medical center might be brought up on formal charges and face a huge civil penalty.

For now, at least, it's business as usual. And the university continues to receive federal funding.

But legislators are taking note. Democratic Congressman Bobby Rush registered a congressional inquiry into the university's alleged patient-dumping practice, writing, quote, "I am concerned about recent media reports that allege that the medical center is turning away and refusing treatment to low- income, uninsured patients."

Republican Senator Chuck Grassley also called for action over a year ago. The two recently got together to share their concerns.

SENATOR CHUCK GRASSLEY, R-IOWA: In the case of this hospital, there was accusation of patient dumping. Congressman Rush came to me. We visited about this. We are thinking in terms of legislation on the health care reform bill that's coming before Congress.

EARHARDT: Last month, the Urban Health Initiative held a forum to address such concerns, but all that came out of it was their desire to repair the relationship with the community. The medical center continues to insist that no one gets turned away from care. Maybe that's because the South Side's poor think they'll just be shown the door.

So, why should Americans be concerned?

CATRON: The Urban Health Initiative was developed in Chicago which is the hometown of the Obamas. If they will develop a program like this for their neighbors, what do they likely to do for us out in flyover country?

EARHARDT: With health care high on the presidential agenda, we will soon find out.

PRESIDENT BARACK OBAMA: We are going to pass health care reform — not 10 years from now, not five years from now. We are going to pass it this year.


HANNITY: And joining us FOX News correspondent, our own Ainsley Earhardt.

Ainsley, great report.


HANNITY: I follow the story for a long time.


HANNITY: So, basically, this is patient dumping.

EARHARDT: Well, you know, which is illegal under Ronald Reagan's plan. It's illegal, the patient dumping. A lot of folks that we talked in Chicago said this is patient dumping, and legislators are starting to take note of this, Sean.

HANNITY: Right. All right. But here's the issue, because it's Barack Obama. It's Valerie Jarrett.


HANNITY: It is David Axelrod.


HANNITY: They ran it like a political campaign.


HANNITY: They went into the churches. They went into the community.


HANNITY: Told everybody, no, this is the greatest thing in the world.


HANNITY: But they did it so the hospital could make more money.

EARHARDT: All right. So, they say it's the greatest thing in the world. When we went to Chicago, we talked to folks to find out what they thought about it. Fair and balanced, we talked to different people. They also say that they are not for this — so, the folks that we talked to, at least. In fact, one woman said that her child, 12-year-old child, was mauled by a pit bull.

HANNITY: A dog, right.

EARHARDT: A dog — took the child to the hospital. They turned them away, gave him a shot, said, "You're fine. Go home." The child was not fine. The mom was unhappy with the health care assistance they got there at the emergency room. So, they drove an hour away to get surgery. The child was mauled.

HANNITY: You see — you see there is an audacity here by the Obamas on my mind. In other words, they try to convince, "Oh, we want everyone American covered," blah, blah, blah.


HANNITY: And meanwhile, they did this. They benefited financially because her pay went up significantly when he became a state senator at this very hospital.

EARHARDT: Right. People are just very skeptical of this plan. At least the folks that we talked to. We want to tell you, you know, make it fair and balanced. We're going to talk to everyone there. And the people we talked to are unhappy with this.

HANNITY: All right. It's a great report. Ainsley, as always, we appreciate you being with us.

EARHARDT: Thank you. Sure..

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