MONTGOMERY, Ala. – Montgomery’s Jackson Hospital insists it will have to close permanently if a court does not force Blue Cross Blue Shield of Alabama to raise its reimbursement rates for the hospital.
The hospital, which filed for bankruptcy last year, currently operates under a $25 million debtor-in-possession loan from Jackson Investment Group, the parent company of Georgia-based Jackson Healthcare. The board of directors has threatened that the hospital will cease operations as early as July 1 if a deal with the state’s largest insurer isn’t reached.
“(W)ithout higher reimbursement rates from Blue Cross Alabama, Jackson Hospital will run out of money (in August) and will not be able to sustain operations,” the hospital said in a court filing on Tuesday.
Blue Cross holds that it has been fair to the hospital throughout its financial issues, repeatedly renegotiating rates to help the financially struggling facility.
“Far from acting in bad faith, BCBSAL has been a consistent good faith partner to Jackson Hospital for years,” the insurer said in a court filing. “Indeed, the central irony of this dispute is that it arises from BCBSAL’s willingness to do Jackson Hospital a favor.”
Losing Jackson Hospital would be a major blow to the River Region as a whole. It’s the closest hospital to downtown Montgomery and the Capitol complex.
Blue Cross members account for 22.4% of the hospital’s patient charges, and the insurer contributes 29% of the hospital’s cash revenue, according to data from the hospital’s website. Despite only making up a quarter of its patients, the hospital says more money from Blue Cross is the only way for the facility to stay afloat.
Jackson Hospital’s legal route
Jackson Hospital filed an emergency motion earlier this year to compel BCBSAL to increase what it pays the hospital for inpatient and outpatient services. U.S. Bankruptcy Judge Christopher Hawkins dismissed the hospital’s motion last week. The June 25 deadline set by the hospital to reach a deal is now one day away.
After an expedited evidentiary hearing, Hawkins ruled that the hospital did not meet the standard for a preliminary injunction, meaning that the case will proceed on a normal timeline.
Hawkins wrote that a court intruding into a contract dispute between two parties would be unprecedented. Though the hospital closing would certainly harm the public, such an intrusion would also have an adverse effect on public interest because “the sanctity” of contracts is “a cornerstone to our legal system and economy,” he wrote.
The decision decries how the hospital has blamed Blue Cross for its financial woes, calling the hospital’s issues “self-harm” and its impending closure “unequivocally avoidable.”
“A lifeline – offered in good faith by the Government Entities – has been thrown to the Hospital, but the Hospital will not grab it,” Hawkins wrote. “Instead, the Hospital has filed the Motion, and its board has passed a resolution setting a deadline of June 25, 2026, for either BCBSAL (by agreement) or this Court (by a mechanism so extraordinary that the Hospital could not point the Court to any case in which it has ever been utilized) to raise reimbursement rates.”
The state of Alabama has pledged $40 million to help the hospital, but Jackson can only recoup those funds once it emerges from bankruptcy.
“Emerging” from bankruptcy is a complicated legal process, but one condition in its court-approved plan to do so was negotiating again with Blue Cross about its rates.
But because it won’t pay the hospital the rates it pays Baptist Medical Center South, Jackson sued the insurer for failing to negotiate in good faith, which the hospital alleges is a breach of the two parties’ contract. They had agreed on 2026 rates in May of last year, but at Jackson’s request, they renegotiated later in the year.
Blue Cross claims that after reaching a deal to raise base rates by around 12%, Jackson CEO John Quinlivan demanded the insurer increase rates to match what BCBSAL pays Baptist South, another hospital in the Montgomery area. The insurer did not agree to this demand, and both parties later signed an agreement matching the original deal.
Blue Cross Blue Shield of Alabama has repeatedly held that it is the industry standard to have different rates for different facilities in the same area. Reimbursement rates are based on several factors, including case mix, patient acuity and the scope of services provided, the company has said.
Baptist South is a level-one trauma center, the highest designation a hospital can get. Jackson Hospital is a level-three trauma center.
In a statement, BCBSAL applauded the court’s dismissal of the hospital’s emergency motion.
“Blue Cross and Blue Shield of Alabama agreed with and is grateful for the court’s ruling, which supports our responsibility to protect our customers – the nearly two million members here in Alabama who depend on us for access to high‑quality, affordable healthcare,” spokesperson Sophie Martin told ADN. “That said, we very much want Jackson Hospital to remain open and continue providing care to patients. We are working with State and local officials and in discussions with Jackson Hospital in an effort to find a solution that meets the needs of the community and our customers. ”
What more money would do
If Jackson Hospital does emerge from bankruptcy, it can expect a $40 million grant from the state of Alabama. But the state specified that the hospital must use the grant for infrastructure repair and replacement, not everyday operating costs.
Hawkins, the bankruptcy judge, in his ruling also referenced $40 million in support from the city of Montgomery and Montgomery County. But the hospital argued in its Tuesday filing that the court got it wrong.
The hospital already received $25 million of the $40 million of grants, and the other money won’t be available to help its current blunders, it said.
“This $25 million from the City and County was previously spent on operational expenses,” the hospital’s filing reads. “The remaining $15 million from the City and County would not become available to Jackson Hospital until 2027, 2028, and 2029 (in equal installments).”
Because Jackson Hospital is under a debtor-in-possession loan, additional money doesn’t make its way straight to the coffers of the hospital.
Jackson Hospital says that receiving the reimbursement rates they want from Blue Cross would amount to around $28 million in patient care revenue.
But if they were to receive a legal settlement in their case against the insurer, very little of that money would actually make it to the hospital.
It would first go to repaying the Jackson Investment Group’s legal expenses. Georgia Republican gubernatorial nominee Rick Jackson, whose name is a coincidence, owns the group.
After that, money would trickle down to the Jackson Investment Group itself to satisfy “and accrued and unpaid interest thereon as provided in this agreement.”
The hospital comes third, but only 70% of the remaining money would go to the Jackson Hospital Corporation for the purpose of paying out any obligations owed to JIG. The remaining 30% of the money would go to a nonprofit organization of JIG’s choosing.
The waterfall structure of distribution for theoretical court winnings is complicated and depends on the status of Jackson Hospital’s bankruptcy case, but a victory in court doesn’t necessarily mean Jackson is saved.
Despite multiple attempts, Alabama Daily News could not reach a spokesperson for Jackson Hospital on Tuesday.
Hawkins has scheduled a status hearing for the case for June 30 at 2:00 p.m. in Montgomery.