Judge urges Department of Health to act as North Star eyes steep cuts if state doesn’t step in soon

We have an entire healthcare system in the North Country that is dependent on the next few weeks of this case,”

U.S. Bankruptcy Judge Wendy Kinsella

BY JIMMY LAWTONNorth Country This Week

SYRACUSE – North Star Health Alliance will make drastic cuts and begin seeking state permission to start shutting down portions of its facilities if the Department of Health doesn't step in to help immediately

Representatives from North Star Health Alliance, including CRO Rob Bloom and interim CEO Andrew Manzer, as well as their attorney, were clear that if funding did not come from the state or elsewhere in a timely manner drastic cuts were coming.

That was the takeaway from a bankruptcy hearing Wednesday March 11, in which U.S. Bankruptcy Court Judge Wendy Kinsella granted a request to allow North Star to use cash collateral for one more week, despite concerns from creditors and budget projections showing the fiscal cliff has arrived.

During a visit to the area on Monday, Gov. Kathy Hochul fielded questions but provided no solid answers regarding whether the state would provide help to keep Claxton-Hepburn Medical Center and Carthage Area Hospital afloat though the restructuring process that reportedly already cost the area nearly 200 jobs. Both are operated by North Star.

Kinsella warned that time is running short to stabilize a financially troubled North Country health system, urging key decision-makers to meet quickly and determine whether state support or another plan can keep operations going.

During a hearing in U.S. Bankruptcy Court, Kinsella said the court shares concerns raised by attorneys about the urgency of the situation and warned that delays could lead to a sudden crisis affecting healthcare access across the region.

“The court is certainly feeling that from up here on the bench that we are kicking the can down the road and we're going to hit a brick wall here in the next week or so... to the extent that all of the parties need to put their heads together and get together in person. We all know in person works a lot better than a phone call or a video call, and they're willing to make that trip to Albany or wherever that meeting makes sense, or come to my courtroom, I'd be happy to have everybody here for a mediation session any day, anytime, anyplace."

The judge urged attorneys to quickly arrange a meeting involving people who have authority to make decisions, including representatives of the New York State Department of Health, the organization’s newly appointed chief executive officer, and its chief restructuring officer.

Attorneys from DOH who were present at the meeting said they would work to make a meeting happen but there were no commitments made.

The court said the goal of such a meeting would be to determine exactly what information the Department of Health needs to evaluate potential support for the health system or, if that is not possible, to identify an alternative plan.

“...We have an entire healthcare system in the North Country that is dependent on the next few weeks of this case,” the judge said.

While acknowledging that the Department of Health has previously provided significant funding and is under no obligation to do so again, the judge stressed that the potential consequences of inaction could be severe.

“So, please convey that to the Department of Health team that the court expects this to be top priority, because the fallout, if this does not succeed or winds up in orderly liquidation, is going to be not something that any of the parties here want to consider,” she said.

To speed discussions, the judge said the parties should consider meeting in person rather than continuing discussions by phone or video. The court even offered to host mediation.

“I’d be happy to have everybody here for a mediation session any day, anytime, anyplace,” the judge said.

Kinsella wasn’t alone. A creditor that’s owed $7 million from North Star raised similar concerns.

“I empathize with the… debtor side here, because I'm normally on the debtor side of the hospital cases. But from my perspective, my clients’ perspective, and I would imagine, most of the vendors who continue to provide post petition services, we need more of a sense of urgency here and the meeting (with DOH.),” Frank Oswald, who represents Ovation said.

“You know, it's only so far the vendors can continue to basically finance this case. So, you know, I've had it where the court has directed such meetings in these cases, particularly, again, if, if the debtor believes that the third party financing, at least at this point, is, is, you know, dead, which, which is what, which is what I'm reading between the tea leaves here,” he said.

Representatives from the state did not commit to a meeting at the hearing, but said they would work to make it happen.

Oswald said the hearings so far have done little to move things forward. 

“... these hearings have just been general generalizations, and approving kicking the can week to week. I know it's the best we can do without the money, but there needs to be a decision whether the state's going to step up, pay for the administrative costs, pay for the wind down and hold the report.

Later in the hearing, the court granted interim authorization for the organization to use cash collateral while the bankruptcy case proceeds.

The court then moved on to consider additional motions, including a request to allow payment of employee wages and certain pre-bankruptcy obligations, but only until March 18.

The news comes on the heels of a budget projection showing a negative balance of $16 million by mid-May.