Remove strings from beans. Cut beans into 2-inch pieces; wash and set aside.
Remove rind from bacon and discard rind. Cut off three 1/2- inch slices from bacon, and set aside. Cut remaining bacon into 1/2-inch cubes; set aside.
Place beans, reserved bacon slices, water, and red pepper pods in a Dutch oven. Cover and bring to a boil. Reduce heat; simmer 2 1/2 hours. Add salt and pepper; cook 30 minutes or until tender.
Place cubed bacon in a small skillet; cook over medium heat until crisp. Drain well. Garnish beans with fried bacon cubes.