Court filings show that any Jackson Hospital settlement in its lawsuit against Blue Cross and Blue Shield of Alabama would send money to attorneys and an out-of-state investment group before a dollar reaches hospital operations.

A joint prosecution and funding agreement filed in the U.S. Bankruptcy Court for the Middle District of Alabama lays out a “Waterfall Distribution of Litigation Proceeds” that prioritizes repayment to the hospital’s financial backers over the facility itself.

Under the agreement, funds from any settlement or court award would first reimburse legal expenses incurred by Jackson Investment Group, the Atlanta-based parent company of Jackson Healthcare that has provided tens of millions in debtor-in-possession financing during the bankruptcy.

After legal costs, proceeds would flow to Jackson Investment Group itself to satisfy the DIP loan and accrued interest. That loan carries a 14% interest rate.

The hospital comes third. Even then, only 70% of remaining funds would go to the Jackson Hospital Corporation. The other 30% would go to a nonprofit organization of Jackson Investment Group’s choosing.

The waterfall structure means a courtroom victory does not necessarily translate into financial relief for the hospital’s 1,800 employees or the Montgomery community that depends on the 344-bed facility.

The filing surfaces as Jackson Hospital approaches its self-imposed June 25 deadline to announce closure if BCBS does not agree to raise reimbursement rates. Last week, U.S. Bankruptcy Judge Christopher Hawkins denied the hospital’s emergency request to force BCBS to increase those rates, calling the mechanism Jackson sought “antithetical to the public interest.”

Alabama taxpayers have committed significant public funds to keeping the hospital open. The City of Montgomery has put up $22.5 million, Montgomery County $10 million, and Governor Kay Ivey pledged up to $40 million in state funds after the hospital exits bankruptcy.

A status hearing in the case is scheduled for June 30.

Sawyer Knowles is a state and political reporter for Yellowhammer News. You may contact him at [email protected].