Melt butter in large saucepan over low heat; blend in flour, salt, and pepper. Cook, stirring constantly, for about 1 minute. Remove from heat gradually stir in milk. Return to heat; cook until thickened and bubbly. Fold in ham, onion, green pepper and cheese. Pour over potatoes in a large bow. Stir gently then move into a buttered 13X4-inch baking dish; cover with foil. Bake at 350 degrees for 30 minutes. Uncover and continue to bake for 1 hour. Let stand for 10 minutes before serving.