Jackson Hospital Sues Blue Cross in Chapter 11 Fight

Jackson Hospital and Clinic, the bankrupt Montgomery health system, has filed a major lawsuit against Alabama’s largest health insurer. The hospital claims Blue Cross and Blue Shield of Alabama refused to pay fair reimbursement rates, contributing to years of financial strain and imperiling the hospital’s ability to keep its doors open, WSFA has reported.

The complaint, filed Dec. 18 in U.S. Bankruptcy Court for the Middle District of Alabama, seeks more than $250 million in damages and emergency relief the hospital says is crucial to its continued operation. Jackson alleges the insurer’s below-market reimbursement rates and refusal to negotiate can force closure if a judge does not intervene.

Jackson Hospital CEO John Quinlivan said the lawsuit is part of ongoing efforts to save the facility, a key healthcare provider for Montgomery and the Alabama River Region. In a written statement, Quinlivan noted the hospital has worked for months with local and State officials to secure funding for reorganization.

“For the past six months, we have been working diligently to save Jackson Hospital, a critical healthcare resource for Montgomery and the Alabama River Region. … Because we have been unable to reach a fair agreement with Blue Cross Blue Shield that ensures the hospital’s long-term viability, we filed a lawsuit requesting emergency relief from the Court …”
— John Quinlivan, Jackson Hospital CEO

Jackson’s complaint describes its dispute with Blue Cross as more than a contract fight. The hospital says it wants a judge to order the insurer to pay at least the same rates it pays to other Montgomery hospitals, such as Baptist Hospital, and to negotiate in good faith as required under Alabama law.

Blue Cross and Blue Shield of Alabama released its own statement pushing back against the lawsuit’s claims. The insurer said it has negotiated with Jackson Hospital and repeatedly raised reimbursement rates to reflect the hospital’s financial condition.

“From the start, Blue Cross has negotiated with Jackson Hospital in good faith and has repeatedly increased Jackson Hospital’s reimbursement rates in recognition of its financial difficulties. Jackson Hospital is more than fairly compensated …”
— Blue Cross and Blue Shield of Alabama statement

The insurer also noted that Jackson treats a relatively small share of its customers—about 25 percent—and asserted that the hospital’s outside lawyers are seeking to shift responsibility for mismanagement onto Blue Cross.

Jackson Hospital has been in financial distress for years. It filed for Chapter 11 bankruptcy protection earlier this year after defaulting on bond payments and accumulating significant debt. Efforts to keep the hospital operating have included federal funding and leadership changes as part of restructuring.

Local government support has also played a role. The City of Montgomery and Montgomery County pledged millions in grants as part of a broader effort to help Jackson reorganize, and the hospital’s bankruptcy financing depends on securing a total of $100 million in public aid.

The lawsuit highlights a deeper debate across Alabama over how insurers negotiate rates with hospitals and the broader pressures facing community healthcare providers. Jackson officials have warned that without court intervention or significant new funding, the hospital could be forced to reduce services or close entirely—a major blow to healthcare access in the region.

Full details about Jackson Hospital & Clinic, Inc. v. Blue Cross and Blue Shield of Alabama are available at THIS LINK.