On Tuesday, Jackson Hospital officials announced they had filed for bankruptcy.
According to a news release, Jackson Hospital & Clinic, Inc. and JHC Pharmacy, LLC voluntarily filed for Chapter 11 protection in the United States Bankruptcy Court for the Middle District of Alabama. All Jackson Hospital & Clinic facilities remain open and operating.
Chapter 11 bankruptcy is a legal process that allows a debtor to reorganize their debts and assets to continue operating. The Montgomery City Council declined to guarantee a loan for Jackson Hospital on Friday.
"This action will enable the Hospital to reorganize operations and implement a financial restructuring through a court-supervised proceeding while continuing to provide world-class patient care," said Chief Restructuring Officer Allen Wilen. "We have been serving the community for nearly 80 years and look forward to continuing to deliver excellence in personal healthcare far into the future. While we have taken important steps to strengthen leadership, enhance revenue, and better manage costs and liquidity, we are operating in what continues to be an extremely challenging environment. Bankruptcy is never an easy decision. However, it is the best path forward for the Hospital's stakeholders as we focus resources on continuing to operate."
Alabama not expanding Medicaid, increased labor costs, stagnant reimbursement rates, a challenging payor mix, and fallout from COVID-19, among other factors, were listed in the news release as reasons for Jackson Hospital's financial troubles.
In 2023, gross charges related to the care of uninsured patients exceeded $45 million.
Wilen said that the Chapter 11 process gives the Hospital the time and breathing room needed to explore strategic alternatives, resolve legacy debt, establish a single platform to settle claims and ensure the hospital's future.
"For months leading up to this announcement, Jackson Hospital held meetings with various parties, including the bondholders and elected officials from Montgomery County and the City of Montgomery, to explore all strategic alternatives to return the Hospital to financial stability," said Wilen. "Bondholders offered to provide debtor-in-possession financing but required a fully collateralized $20.5 million loan guarantee from the City of Montgomery. We continued to work with the City, providing all requested information, culminating in a January 31, 2025, meeting for the City Council to vote on a loan guarantee resolution. Instead, several council members requested information previously provided to the City's attorney and made material changes to the resolution, which postponed the decision time for the City Council and the Mayor."
Wilen continued, "After the January 31 City Council meeting, the bondholders expressed concern that we could not effectuate the loan guarantee, and therefore, they could not extend the financing needed to fund the Hospital's operations. We had no choice but to consider alternative paths to continue the Hospital's uninterrupted operation, leading to today's announcement."
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