Jackson Hospital seeking $1.4 million judgment against Blue Cross and Blue Shield of Alabama
Jackson Hospital has filed a lawsuit in the U.S. Bankruptcy Court for the Middle District of Alabama, seeking a judgment of $1,399,999.94 against Blue Cross and Blue Shield of Alabama.
The Montgomery hospital claims BCBS withheld that amount of funds following Jackson Hospital’s Chapter 11 filing last year.
The lawsuit alleges that when the hospital entered Chapter 11, federal bankruptcy law immediately enacted an “automatic stay.” It says that generally prevents creditors from independently seizing funds without the approval of the bankruptcy court.
Jackson Hospital claims BCBS took the funds without court authorization, which it says were crucial for the hospital’s ability to maintain its operations.
Jackson Hospital is seeking the funds, in addition to sanctions and a prohibition against BCBS from withholding or controlling funds without court authorization.
Action 8 News contacted Blue Cross and Blue Shield of Alabama for a response. BCBS Director Sophie Martin released this statement regarding Jackson Hospital’s claims:
“Blue Cross and Blue Shield of Alabama is aware of the lawsuit filed by Jackson Hospital on Monday, February 16, 2026. The hospital’s allegation that our company is “withholding $1.4 million in patient reimbursements” is not accurate. It is regrettable that the hospital has twisted our gesture of voluntarily providing it with an over $1.5 million cash advance — one of the actions Blue Cross undertook to help Jackson Hospital navigate its financial difficulties.
“Although Blue Cross had the right under our written agreement to begin recouping our advance to Jackson Hospital in October 2024, we waited another seven months before beginning recoupment at the hospital’s request. Jackson Hospital’s bankruptcy proceedings did not prevent such recoupment. In this case, recoupment occurred with Jackson Hospital’s express agreement and knowledge. To now claim otherwise is inaccurate.”
As Action 8 News has reported, the hospital filed for Chapter 11 bankruptcy protection in February of 2025. It missed a $60 million interest payment on bonds.
In filing for bankruptcy, Jackson Hospital said it experienced significant financial pressures in recent years due to increased labor costs, stagnant reimbursement rates, a challenging payor mix and fallout from COVID-19, among other factors. It said without Medicaid expansion in Alabama, it suffered significant financial losses due to its care for uninsured people. In 2023 alone, the hospital said gross charges related to the care of uninsured patients exceeded $45 million.
This week, Gov. Kay Ivey announced that she will commit $40 million for capital expenses at Jackson Hospital, but only after it has emerged from bankruptcy.
Jackson Hospital CEO John Quinlivan told Action 8 News in November that with support from the city, county and state, he expected the hospital’s restructuring plan to be approved, allowing Jackson Hospital to fully exit bankruptcy in the second quarter of 2026.
Jackson Hospital is licensed for 344 beds, serving Montgomery and the River Region as a community not-for-profit facility. It opened in 1946 with 37 beds and five doctors.
