Jackson Hospital & Clinic, Inc. and its pharmacy subsidiary filed for chapter 11 bankruptcy protection on February 3, 2025, in the U.S. Bankruptcy Court for the Middle District of Alabama. The 344-bed hospital—Montgomery's safety-net provider tracing its roots to 1894—sought court protection after defaulting on $60 million in bond debt in September 2024. With assets and liabilities each estimated between $100 million and $500 million, the filing came just four days after Montgomery's city council declined to guarantee a $20.5 million loan that bondholders had conditioned on municipal backing.
What began as a financial restructuring has included three DIP financing amendments, an October 2025 liquidity shortfall that left the hospital with about $2 million in the bank, government funding negotiations, a $250 million lawsuit against Blue Cross Blue Shield of Alabama, and legislation enabling dual bankruptcy structures. Throughout these proceedings, Jackson Hospital has continued operating all facilities, maintaining emergency care, cardiac services, cancer treatment, and other services for Montgomery and surrounding rural counties while pursuing restructuring alternatives.
The hospital simultaneously faced increased labor costs, stagnant reimbursement rates, and lingering COVID-19 impacts. A failed affiliation with HumanityCorp left CAPTA Health Partners, a HumanityCorp affiliate, with a claim exceeding $28 million on the unsecured creditors list.
Jackson Hospital employs approximately 1,641 full-time employees, 50 part-time employees, 361 PRN (as-needed) nurses, and 31 contract workers—a workforce that has remained largely intact throughout the restructuring. The hospital operates as a 344-licensed-bed acute care facility providing a comprehensive range of services including emergency care, cardiovascular services, oncology, orthopedics, women's health, and behavioral health. As Montgomery's designated Level II trauma center, the hospital handles cases that cannot be addressed at smaller regional facilities. The breadth of services and the hospital's role in medical education—training nursing students and residents—are part of its operations.
Yellowhammer News reported that from 2011 through 2022, hospital revenue increased from approximately $183.5 million to nearly $333 million—an 80-plus percent increase. Despite this revenue growth, the hospital recorded net losses in six of those twelve years. The most recent IRS Form 990 (2022) showed a net loss of approximately $8.4 million despite record revenue. From 2016 to 2021, the hospital burned through approximately $60 million in reserves to cover operating losses, reaching what bankruptcy filings described as a "virtually irreversible cash position."
The hospital missed its bond interest payment on September 3, 2024, triggering S&P's downgrade to "D" the following day. The defaulted bonds, totaling approximately $60 million and issued through the Medical Clinic Board in 2015, comprised the bulk of long-term debt. UMB Bank, the bond trustee, had demanded full payment of all principal and interest in August 2024, citing the hospital's failure to make rent and lease payments for five consecutive months.
The hospital responded by engaging Allen Wilen of Eisner Advisory Group as chief restructuring officer in early September 2024, determining not to proceed with the HumanityCorp affiliation. Simultaneously, CEO Joe B. Riley and COO Michael James departed, with Ronald Dreskin brought in as interim CEO. Bondholders moved to provide bridge loans after the default, with UMB Bank serving as trustee and Herbert Smith Freehills Kramer Levin representing bondholders. In November 2024, investors agreed to loan up to $22 million in bridge notes structured as Tranche 1A ($5 million), Tranche 1B ($10 million), and Tranche 2 ($7 million), bearing a 13% interest rate, plus an additional $3.5 million in financing.
DIP financing negotiations centered on bondholders' requirement for a fully collateralized $20.5 million guarantee from the City of Montgomery. When the city council did not approve the guarantee on January 31, 2025, bondholders withdrew their proposal—and the hospital filed chapter 11 four days later.
Chapter 11 Proceedings and Restructuring Strategy
The bankruptcy petition was filed on February 3, 2025, with an emergency motion for an expedited hearing granted for February 5, 2025. Both Jackson Hospital & Clinic, Inc. and subsidiary JHC Pharmacy, LLC entered chapter 11. The First Day Declaration described the hospital's liquidity crisis and the factors leading to the filing. First day motions prioritized operational continuity: employee wage and benefit payments, patient care obligations, critical vendor relationships, cash management, utilities, taxes, and insurance. The expedited hearing schedule reflected both the hospital's essential community role and urgent liquidity needs—as the region's primary safety-net provider, any disruption to operations would have severely impacted access to emergency care, trauma services, and specialized treatment for Montgomery County and surrounding rural areas.
The hospital's prepetition debt structure includes multiple secured obligations that have shaped case dynamics:
Debt Instrument
Trustee/Agent
Counsel
Series 2015 Bond (~$60M)
UMB Bank, N.A.
Herbert Smith Freehills Kramer Levin
2024 Bridge Note
ServisFirst Bank
Balch & Bingham LLP
Regions Bank 2006 Bond
Regions Bank
Maynard Nexsen
Jackson Investment Group, parent of Jackson Healthcare, committed DIP financing to maintain operations. Despite the shared "Jackson" name, these entities are unrelated to the debtor hospital. The Interim DIP Order approved on February 6, 2025, authorized initial draws of $10 million with superpriority status. A March 4, 2025 hearing addressed the remaining balance, with the Final DIP Order entered on March 6, 2025.
Component
Details
Lender
Jackson Investment Group, LLC
Initial Authorization
$24.5 million
Maximum Facility (with amendments)
Up to $35 million
Interest Rate
14% (19% default rate)
Guaranteed Fees
~$3.5 million regardless of outcome
Reporting
Weekly cash variance; monthly operating reports
Priority
Superpriority status ahead of bondholder liens
Lender Approval Rights
Approval authority over any reorganization plan or asset sale
The Alabama Political Reporter detailed that the DIP agreement gives Jackson Investment Group first claim on nearly all hospital assets, ahead of vendors, bondholders, and other creditors. Any lawsuit recovery must first repay the DIP loan in full.
Period
Amount
Cumulative
February 2025 (Interim)
$10.0 million
$10.0 million
March–April 2025
$6.0 million
$16.0 million
May 2025
$5.5 million
$21.5 million
Post-First Amendment
$2.2 million
~$23.7 million
The DIP facility was amended three times, extending maturity and modifying milestones. The First DIP Amendment (July 15, 2025) extended the maturity date. The Second DIP Amendment (August 28, 2025) again extended maturity and deleted the sale approval milestone.
The Third DIP Amendment (October 21, 2025) extended maturity, added $25 million in potential funding, waived budget defaults, waived the $100 million government grant condition, and extended the Medical Clinic Board asset transfer milestone. In June 2025, the Debtors discovered approximately $14 million in a previously unknown US Bank deposit account.
On March 19, 2025, UMB Bank and ServisFirst Bank filed an appeal of the Final DIP Order, with a Motion to Stay Pending Appeal following on March 20, 2025. The bondholders objected primarily to carve-out provisions that provided priority funding for estate professionals. On October 14, 2025, UMB Bank withdrew its stay motion, effectively accepting the DIP structure and removing a significant impediment to the restructuring.
The Debtors filed a Sale Motion on April 18, 2025, seeking court approval to sell substantially all assets pursuant to Section 363 of the Bankruptcy Code. An amended sale motion followed on May 23, 2025, with the Bidding Procedures Order entered on June 2, 2025. The order contemplated an auction on June 19, 2025, with no stalking horse bidder identified. The sale approval milestone was deleted in the Second and Third DIP Amendments, and the case has evaluated alternative plan structures, including potential government grant funding. Exclusivity has been extended through February 3, 2026 for plan filing and January 31, 2026 for solicitation, with the lease/contract assumption deadline extended to January 30, 2026.
The case has featured vendor disputes, most notably involving Progressive Perfusion, Inc. The vendor filed multiple contested motions throughout the case: a motion to compel critical vendor designation, a motion arguing Medicare reimbursements are not estate property, and an objection to the asset sale—all denied in June 2025. Motions for reconsideration followed in July 2025, also denied. On August 21, 2025, motions to strike and for sanctions were filed against Progressive Perfusion's counsel. The court issued a Show Cause Order on August 28, 2025 and entered a sanctions order on November 20, 2025 against attorney Cassie D. Preston and Gordon Rees Scully Mansukhani, LLP. Additionally, multiple relief from stay motions were filed in March 2025 relating to medical malpractice cases.
October 2025 Funding and Liquidity
On October 2, 2025, Jackson Investment Group representatives warned the Montgomery City Council that the hospital could close within 30 days without new funding. Rick Jackson stated publicly that the hospital had approximately $2 million in the bank—insufficient to continue operations. The hospital's DIP lender confirmed that the hospital was "out of money." Hospital administrators sought a $20 million loan from the city, while an investment banker testified that Jackson Hospital needed $50 million in aid. The lender later clarified it required $100 million in government aid to continue operations and emerge from bankruptcy.
Mayor Steven Reed vetoed the hospital funding resolution, but on October 24, 2025, the city council voted unanimously to override the veto, committing to fund the hospital's restructuring efforts. Council member Charles Jinright characterized the situation starkly: "This is a dire situation, people will die over this." On October 14, 2025, the bankruptcy judge approved funding following testimony that the hospital would not remain open through the end of October without additional support, extending the DIP loan authorization from $22 million to $25 million.
Despite the city's increased commitment, the hospital remains short of its funding target. As of December 17, 2025, the hospital stood at $202 million in commitments out of $293 million needed. Montgomery County's decision to decline the additional $7.5 million left a gap. The Third DIP Amendment waived the $100 million government grant condition, and on December 8, 2025, the Debtors filed a motion for authority to receive, segregate, and utilize funds from governmental sources.
Blue Cross Blue Shield Adversary Proceeding
On December 18, 2025, Jackson Hospital filed an adversary proceeding in U.S. Bankruptcy Court seeking damages in excess of $250 million against Blue Cross Blue Shield of Alabama. CEO John Quinlivan stated that the lawsuit was filed after BCBSAL allegedly failed to provide fair market reimbursement rates.
The adversary complaint alleges that BCBSAL is a "monopoly" in Alabama commercial health insurance, paying Jackson Hospital approximately 140% of Medicare rates while paying the competing Montgomery hospital approximately 240% of Medicare rates—a disparity of 30–40% for comparable services. The complaint claims BCBSAL engaged in monopolistic practices interfering with competitive bidding and used its market power to cause financial harm that contributed to bankruptcy. The emergency relief request asks for a mandatory injunction to rewrite reimbursement rates and compel BCBSAL to pay Jackson Hospital "at a minimum" what it pays Baptist Hospital in Montgomery.
The complaint seeks damages for past harm and prospective relief related to reimbursement rates.
Blue Cross Blue Shield of Alabama responded publicly that negotiations were "in good faith" and that the insurer "repeatedly increased Jackson Hospital's reimbursement rates." BCBSAL noted its customers make up only 25% of Jackson Hospital's patient volume. Alabama Patients First LLC launched an advertising campaign targeting Blue Cross, spending more than $320,000 on television advertising during high-profile programming including SEC football games. On December 23, 2025, the Debtors filed an application to retain Iacuone McAllister Potter PLLC as special litigation counsel for the adversary proceeding.
Medical Clinic Board and Legislative Response
The state senate passed SB222 in March 2025, with the bill enacted in April 2025. The legislation added Section 11-58-5.2 to the Code of Alabama, authorizing medical clinic boards to pursue debt readjustment under federal bankruptcy law when the lessee hospital has filed chapter 11. The law also grants board members immunity from personal and official liability claims.
Alabama's new law enables a dual bankruptcy structure: the Jackson Medical Board could file municipal bankruptcy under Chapter 9 while the hospital proceeds under chapter 11. The Jackson Medical Board owns major hospital assets, including real estate, while the hospital operates as lessee. Under prior law, medical clinic boards were not allowed to file for bankruptcy, and "the problem is that Jackson Hospital basically doesn't own any of the assets." A dual Chapter 11/Chapter 9 structure is uncommon, according to bankruptcy scholars, and the board would face challenges proving insolvency and demonstrating good faith negotiation with creditors.
On November 10, 2025, the Debtors filed a motion for substantive consolidation of the Medical Clinic Board of the City of Montgomery into the bankruptcy proceedings. On December 5, 2025, the court denied the motion, keeping the Medical Clinic Board's affairs separate from the bankruptcy estate. This denial followed an earlier May 2025 ruling where the court denied a motion to include the Medical Clinic Board in professional retention applications, citing conflicts of interest. The Medical Clinic Board's separate status means asset ownership and lease obligations are handled between legally distinct entities.
Alabama Healthcare Landscape
Jackson Hospital's bankruptcy occurs amid broader statewide healthcare strain. According to an Alabama Political Reporter analysis, more than half of Alabama's 52 rural hospitals are at risk of closure, with 23 facing immediate threat per the Center for Healthcare Quality and Payment Reform. Seventy-four percent of Alabama's rural hospitals have negative operating margins.
Alabama is one of 10 states that has not expanded Medicaid, and approximately 300,000 uninsured Alabamians fall into a coverage gap—too poor to qualify for ACA marketplace subsidies yet not qualifying for Medicaid. Medicaid expansion states have comparatively stronger financial stability within their rural healthcare systems.
Cover Alabama and American Cancer Society Cancer Action Network unveiled a billboard near Jackson Hospital with the message "Save Jackson Hospital. Expand Medicaid now." Retired Brig. Gen. Edward Crowell, former board chair of Jackson Hospital, stated: "Medicaid expansion would be a game-changer, strengthening hospitals across the state." Potential closure of Jackson Hospital would strain Montgomery's healthcare landscape. The hospital is one of three hospitals in Montgomery, and as the safety-net provider, it serves Montgomery County residents and patients from surrounding rural counties.
Case Status, Leadership, and Outlook
On November 3, 2025, Jackson Hospital appointed a new three-member Board of Trustees and selected John Quinlivan as CEO. Quinlivan is a 20-year veteran of the U.S. Army Medical Service Corps who spent 19 years with HCA Healthcare, previously serving as CEO of Redmond Hospital in Georgia. The new board—Chairman Charles Evans (former president of HCA Healthcare's Eastern Group), Jeff Crudele (former CFO of Allegheny Health Network), and Gary M. Murphey (former CEO/CFO with restructuring experience)—assumed leadership on October 31, 2025.
Jackson Hospital continues operating under chapter 11, providing uninterrupted patient care across emergency, cardiac, cancer, and specialized services. The DIP facility has been extended through multiple amendments with the sale approval milestone deleted. The BCBSAL adversary proceeding remains pending, with potential damages exceeding $250 million. Government funding commitments total approximately $202 million of $293 million needed. The substantive consolidation motion was denied, keeping the Medical Clinic Board separate from the bankruptcy estate.
Frequently Asked Questions
Why did Jackson Hospital file for chapter 11?
The hospital defaulted on $60 million in bond debt in September 2024 after depleting its investment reserves. Contributing factors included unreimbursed care exceeding $45 million annually, Alabama's non-expansion of Medicaid, stagnant reimbursement rates, COVID-19 impacts, and a failed HumanityCorp affiliation.
Is Jackson Hospital still operating?
Yes. All facilities remain open with patient care uninterrupted throughout the restructuring. The hospital continues to provide emergency care, cardiac services, cancer treatment, and other essential services.
Who is providing the DIP financing?
Jackson Investment Group, LLC (parent of Jackson Healthcare) is providing up to $35 million at 14% interest. Despite the shared "Jackson" name, these entities are unrelated to the debtor hospital. The DIP facility has superpriority status ahead of bondholder liens.
What is the BCBS lawsuit about?
The December 2025 adversary proceeding seeks over $250 million in damages, alleging that Blue Cross Blue Shield of Alabama engaged in discriminatory reimbursement practices—paying Jackson Hospital approximately 140% of Medicare rates while paying a competing Montgomery hospital approximately 240% of Medicare rates.
What is SB222 and how does it affect the case?
SB222 is Alabama legislation enacted in April 2025 enabling medical clinic boards to file bankruptcy when their lessee hospitals file chapter 11. This creates a potential dual Chapter 9/Chapter 11 structure for the Jackson Medical Board and hospital, addressing the unique situation where the Medical Clinic Board owns major hospital assets while the hospital operates as lessee.
Was the substantive consolidation motion approved?
No. The court denied the motion on December 5, 2025. The Medical Clinic Board remains separate from the bankruptcy estate, adding complexity to the restructuring as asset ownership and lease obligations must be negotiated between legally distinct entities.
What happened in October 2025?
The hospital faced an immediate closure threat with only approximately $2 million in the bank. The DIP lender warned the hospital could close within 30 days. The city council overrode Mayor Reed's veto to approve funding, and the bankruptcy judge extended DIP authorization from $22 million to $25 million.
What are the current deadlines?
Plan filing deadline: February 3, 2026. Solicitation deadline: January 31, 2026. Lease/contract assumption deadline: January 30, 2026.
How much government funding has been committed?
The City of Montgomery committed $22.5 million (expanded from an initial $15 million). Montgomery County committed $10 million but declined an additional $7.5 million request by a 2-2 vote with one abstention. Total commitments as of December 2025 stand at approximately $202 million of $293 million needed.
What is the current plan status?
The case is evaluating plan alternatives rather than an immediate 363 sale.
For additional bankruptcy coverage and restructuring analysis, visit the ElevenFlo blog.
First Day Declaration /documents/8a3ed123-15b7-456e-a393-30c7699f4f91/
Interim DIP Order /documents/8d9dd346-96c5-45e8-b61d-8b3c6d45a990/
Final DIP Order /documents/77e90013-5319-49ca-bbae-f8e5c5041e39/
First DIP Amendment /documents/e634106c-3fe7-47b8-84d2-f3044da94a67/
Second DIP Amendment /documents/a40a9f27-f467-4546-8fab-c0f1aaccc005/
Third DIP Amendment /documents/84ad67de-9269-4890-b604-c118f3884c57/
Motion to Stay Pending Appeal /documents/461c5042-97e8-435d-a296-558ab5d27b14/
Sale Motion /documents/33bdc964-6c77-4994-97bc-3da35ffd1fbb/
Bidding Procedures Order /documents/e27865b4-c58d-4b36-a4f2-26b538d7ceb0/
filed for chapter 11 bankruptcy protection https://www.jackson.org/about-us/media-center/jackson-hospital-clinic-restructuring-news/
tracing its roots to 1894 https://www.jackson.org/about-us/history/
defaulting on $60 million in bond debt https://www.wsfa.com/2024/09/05/montgomerys-jackson-hospital-defaults-60-million-bond-payments/
$250 million lawsuit against Blue Cross Blue Shield of Alabama https://news.bloomberglaw.com/bankruptcy-law/bankrupt-hospital-hits-blue-cross-alabama-with-250-million-suit
continued operating https://www.beckershospitalreview.com/finance/alabama-hospital-files-for-bankruptcy/
exhausted its $60 million investment portfolio https://yellowhammernews.com/jackson-hospital-blames-blue-cross-blue-shield-of-alabama-for-its-collapse-but-the-bankruptcy-records-tell-a-different-story/
one of 10 states https://www.alreporter.com/2024/10/31/analysis-rural-hospitals-closure-crisis-alabamas-healthcare-safety-net-at-risk/
failed affiliation with HumanityCorp https://www.beckershospitalreview.com/finance/alabama-hospital-to-restructure-after-defaulting-on-60m-in-bond-payments/
claim exceeding $28 million https://www.wsfa.com/2025/02/04/mayor-reacts-bankruptcy-filing-montgomerys-jackson-hospital/
UMB Bank, the bond trustee, had demanded full payment https://www.bondbuyer.com/news/defaulted-hospital-names-chief-restructuring-officer
determining not to proceed with the HumanityCorp affiliation https://aldailynews.com/struggling-jackson-hospital-brings-on-restructuring-officer-wont-move-forward-with-investment-group/
CEO Joe B. Riley and COO Michael James departed https://aldailynews.com/2-jackson-hospital-leaders-step-down-amid-financial-reorganization/
Bondholders moved to provide bridge loans https://www.bondbuyer.com/news/defaulted-alabama-hospital-to-get-bridge-loans-from-bondholders
Jackson Investment Group https://www.businesswire.com/news/home/20250206883085/en/Loan-from-Jackson-Healthcare-Parent-Company-Enables-Alabama-Based-Jackson-Hospital-Clinic-to-Continue-Uninterrupted-Operations-Amid-Bankruptcy
The Alabama Political Reporter detailed https://www.alreporter.com/2025/12/23/jackson-hospital-finances-bankruptcy-loan-bcbs-lawsuit-collide/
Jackson Investment Group representatives warned the Montgomery City Council https://www.wsfa.com/2025/10/02/investment-group-warns-jackson-hospital-could-close-30-days-without-new-funding/
$100 million in government aid https://www.healthleadersmedia.com/cfo/montgomerys-jackson-hospital-clinic-could-close-within-next-month-after-debt-default-bankruptcy
Expanded to $22.5 million https://www.alreporter.com/2025/12/19/montgomery-county-breaks-with-city-votes-down-jackson-hospital-funds/
city council voted unanimously to override the veto https://www.alreporter.com/2025/10/24/montgomery-council-overrides-veto-amends-resolution-to-fund-jackson-hospital/
the hospital stood at $202 million in commitments out of $293 million needed https://www.wsfa.com/2025/12/17/montgomery-county-commission-votes-not-provide-additional-jackson-hospital-funding/
CEO John Quinlivan stated https://www.wsfa.com/2025/12/19/jackson-hospital-files-lawsuit-against-blue-cross-blue-shield-alabama/
Alabama Patients First LLC launched an advertising campaign https://www.alreporter.com/2025/12/24/ad-blitz-targets-bcbs-amid-jackson-hospital-lawsuit/
passed SB222 in March 2025 https://www.alreporter.com/2025/03/07/senate-passes-bill-to-allow-jackson-hospital-to-restructure-debt-following-bankruptcy/
enacted in April 2025 https://alison.legislature.state.al.us/files/pdf/SearchableInstruments/2025RS/SB222-enr.pdf
Under prior law https://news.bloomberglaw.com/bankruptcy-law/alabama-bill-would-allow-debt-restructuring-for-clinic-boards
Cover Alabama and American Cancer Society Cancer Action Network https://www.alreporter.com/2024/11/19/new-billboard-urges-medicaid-expansion-to-save-alabama-hospitals/
Potential closure of Jackson Hospital https://www.healthleadersmedia.com/cfo/jackson-hospital-under-threat-closure-could-strain-montgomery-healthcare-landscape
Jackson Hospital appointed a new three-member Board of Trustees and selected John Quinlivan as CEO https://www.businesswire.com/news/home/20251103022348/en/Jackson-Hospital-Appoints-New-Board-of-Trustees-and-Chief-Executive-Officer
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. See the disclaimer.