Struggling Alabama hospital files for bankruptcy but says ‘patient care will not change’

Jackson Hospital filed for Chapter 11 bankruptcy on Tuesday, saying the move will help protect their operations and employees.

Despite the voluntary filing, the hospital in Montgomery said it will remain open, adding that “patient care will not change during this process.”

“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,” Jackson Hospital’s chief restructuring officer Allen Wilen said in a news release.

“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.”

The hospital has been struggling financially for months — in September, it defaulted on a $60 million loan. The bondholder requested full payment after the hospital failed to make interest payments.

Last week, the hospital asked the Montgomery City Council to guarantee a $20.5 million loan, but the city did not approve the request.

“After the January 31st 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,” Wilen said. “We had no choice but to consider alternative paths to continue the Hospital’s uninterrupted operation, leading to today’s announcement.”

The hospital said “increased labor costs, stagnant reimbursement rates, a challenging payor mix, and fallout from COVID-19,” as well as Alabama not expanding Medicaid, has led to their financial crisis.

A report by the Alabama Hospital Association found that the pandemic caused major financial problems for many of the state’s medical centers. About half of the state’s hospitals were losing money, the report found last year, and hospital margins dropped 79% from pre-pandemic levels.

Montgomery Mayor Steven Reed said in a statement that he’s still committed to finding ways to support Jackson Hospital.

“My administration is committed to collaborating with the hospital’s leadership, healthcare professionals, and all relevant stakeholders to ensure that the quality of care our citizens rely on remains uninterrupted during this restructuring process. We will work diligently to support Jackson Hospital in navigating this challenging period, with the goal of emerging stronger and more resilient,” Reed said.

Jackson Hospital, which opened in 1946, has about 2,100 employees and is licensed for 355 beds.

State lawmakers from both parties issued a statement last week saying they’d work to try to save the hospital, calling it an “economic engine.”

“Numerous cities and counties — urban, suburban, and rural — would be affected by Jackson Hospital’s closing,” the statement read. “40% of patients at Jackson Hospital reside outside of the City of Montgomery. People’s lives and health are on the line. There is nothing more important than saving lives and taking care of people’s health. Therefore, we should all do our part to keep Jackson Hospital open. This responsibility should not just fall on the City of Montgomery. Cities and counties whose residents are served by Jackson Hospital should step up to help as well.”

“As state lawmakers, we support helping Jackson Hospital stay open long-term. There must be strong oversight in which Jackson must continue to provide a robust sustainability and accountability plan,” the statement read. “Together, we can ensure continued access to health care and good jobs for Alabamians. We must save Jackson Hospital.”