Jackson Hospital and Blue Cross and Blue Shield of Alabama have reached an approved agreement that clears a path for the Montgomery hospital to emerge from bankruptcy, remain open and receive $40 million previously committed by the state.

Gov. Kay Ivey’s office announced Monday that Jackson Hospital leadership had approved the agreement with Blue Cross along with a plan to emerge from Chapter 11 bankruptcy.

“This action, which paves the way for the release of the previously agreed upon $40 million from the State for capital expenses, will enable Jackson Hospital to remain in operation,” the governor’s office said.

The development marks a major step forward for a hospital that only weeks ago, faced the possibility of permanently closing its doors amid a dispute with Blue Cross over reimbursement rates.

Jackson announced in early July that it had reached a verbal agreement with the insurer that would allow it to remain open while the two sides continued working toward a final resolution.

Blue Cross confirmed the latest development Monday.

“Blue Cross and Blue Shield of Alabama is pleased Jackson Hospital will remain open and continue serving the Montgomery community and River Region,” the company said in a statement provided to Yellowhammer News.

“For months, Blue Cross has worked with hospital leadership and other stakeholders to keep their doors open and provide patients access to the care they need. Throughout this process, our focus has remained on supporting our members and the community.”

The insurer said it appreciates the efforts of those involved in reaching the agreement and looks forward to continuing its partnership with Jackson.

Ivey called the agreement “monumental good news” for Montgomery and Central Alabama.

“Only weeks away from its 80th anniversary, Jackson Hospital is reborn today stronger and ever more committed to delivering the most trusted medical care to the Capital City and River Region,” Ivey said.

“Jackson Hospital’s agreement to emerge from bankruptcy and keep its doors open to offer a wide range of care, including emergency services, is the direct result of a resolute partnership between state and local officials and hospital leadership.”

Ivey also thanked Jackson Healthcare CEO Rick Jackson for his role in efforts to preserve the hospital.

The state committed $40 million for capital expenses at Jackson Hospital in February, but Ivey made the funding contingent on the hospital successfully emerging from bankruptcy.

Jackson filed for Chapter 11 protection in February 2025 amid mounting financial pressures. Earlier this summer, the hospital warned that it could be forced to close without an agreement providing higher reimbursement rates from Blue Cross. A federal bankruptcy judge rejected Jackson’s attempt in June to force the insurer to increase those rates, leaving the parties to negotiate a solution themselves.

The financial terms of the newly approved agreement were not disclosed in the statements released Monday.

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