Jackson Hospital has sued Blue Cross and Blue Shield of Alabama in an Alabama bankruptcy court for $250 million. The Montgomery-area hospital claims that years of claims underpayment by the insurance giant have directly contributed to its insolvency.
Jackson Hospital, which has about 1,800 employees, filed for Chapter 11 bankruptcy in February 2025 after defaulting on $60 million in bonds. Since its bankruptcy filing, the hospital has been working to secure millions in funding from all available sources to keep its doors open. In November, Jackson Hospital reportedly asked Blue Cross for $91 million, but the company offered only $35 million.
In its lawsuit, Jackson Hospital alleges that Blue Cross has consistently paid lower reimbursement rates on its claims than other similarly sized hospitals in the state. They further claim that Alabama hospitals receive the lowest payments from Blue Cross in the nation, leading to serious instability in the state’s healthcare system. Furthermore, hospital leaders warn that the closure of Jackson Hospital will strain the resources of nearby hospitals and may even limit patient access, particularly in emergency and specialty care.
In response, Blue Cross says it has negotiated in good faith with Jackson Hospital and has increased reimbursement rates multiple times, considering the hospital’s financial struggles. Blue Cross further noted that its customers represent roughly one-quarter of Jackson Hospital’s patients, so the hospital is wrongfully blaming Blue Cross for its financial mismanagement. Finally, Blue Cross maintained that it is a nonprofit health plan that pays taxes and that more than 90% of every premium dollar it receives is paid to hospitals and other medical providers.
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