Blue Cross and Blue Shield has brought Jackson Hospital to the "brink of closure," according to Jackson Hospital CEO John Quinlivan.
Jackson Hospital filed a lawsuit in December against Blue Cross and Blue Shield over alleged "unfair reimbursement rates."
John Quinlivan, CEO of Jackson Hospital, told 1819 News on Friday, "There's just no justification for it on the part of Blue Cross. They have literally brought this hospital to the brink of closure."
"I think the big story is Jackson Hospital is on the brink of closure because of Blue Cross's historic and continuing refusal to pay us competitive rates," Quinlivan said. "We did our own analysis and we had a very limited ability to do that and so it was a very small sample size, and we determined it looked like they're paying Baptist, our local competitor, about 30% more than they pay us. We commissioned a study by an independent third party (and) it's actually a lot more than that. They confirmed that we were right but discovered that the difference is even greater. We've met with Blue Cross. They've been unwilling to increase our rates to the degree we think they should so we're now pursuing it in the courts."
Quinlivan said they were willing to negotiate but were a "long way" from reaching an agreement with Blue Cross.
"We're willing to negotiate. We're willing to talk. They'd have to substantially increase their offer beyond what it is now. Then there's the whole issue of damages because this has gone on for over a decade. I think we're a long way from what would be necessary to settle this case," Quinlivan said.
A large taxpayer-funded assistance package from the City of Montgomery, Montgomery County and State of Alabama is expected to be finalized later in February.
Sophie Martin, a Blue Cross spokesperson, said in a response to 1819 News, "Blue Cross is not the reason Jackson Hospital may close, and the claim that Jackson Hospital's competitors are being paid 'significantly more' ignores how hospital reimbursement works — something Mr. Quinlivan knows. First, Blue Cross customers and revenue are less than 25% of Jackson Hospital's patients and revenue — not even close to a majority."
"More importantly, Blue Cross currently pays Jackson Hospital above the average rates that similarly situated community hospitals receive and has repeatedly worked with Jackson Hospital in recognition of its financial challenges. Hospitals are not — and should not be — paid identically. Reimbursement is necessarily tied to patient acuity, service mix, teaching status, and the level of specialized infrastructure required to treat complex cases. Jackson Hospital provides important community care, but it does not carry the same volume of high-acuity trauma, transplant, and tertiary services as regional referral hospitals, and industry-standard payment systems appropriately reflect those differences," Martin said. "Jackson Hospital's financial distress isn't because of its revenue. From 2011 to 2022 the hospital's revenue nearly doubled, going from $185M to $333M — an average increase of about 8%. The financial difficulties it faces stem from years of operational decisions, payer mix, and market changes well beyond any single insurer. Blue Cross has consistently worked to try to keep Jackson Hospital viable while also protecting Alabama families and employers from unfair cost shifting."
Quinlivan said in a recent AL(dot)com op-ed, "Yes, BCBS accounts for approximately 25% of Jackson Hospital's patients. Elsewhere in the country, BCBS represents even less, 15% to 20% on average. Volume is not the issue. Payment is."
"Hospitals survive on a simple economic reality: Medicare, Medicaid, and self-pay patients all generate losses. Commercial insurance is the only payer category that keeps hospitals afloat by offsetting those losses. When commercial insurers underpay, hospitals bleed cash. When a dominant insurer underpays, hospitals suffocate," Quinlivan said. Nationally, Blue Cross plans reimburse hospitals at up to 240% of Medicare rates. In Alabama, where BCBS wields near-total market control—approximately 88% of the commercial insurance market—that rate drops to about 140% of Medicare. Jackson Hospital receives even less. In fact, outpatient rates at Jackson Hospital have been less than Medicare. This is not a market failure. It is market power. Monopoly power. And its consequences are devastating. Jackson Hospital is at risk of closing not because of mismanagement or inefficiency, but because a dominant insurer refuses to pay rates that cover the cost of care.
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