Lawmakers call on state to act in wake of North Star’s bankruptcy filing, but DOH still silent on receivership plans

BY JIMMY LAWTONNorth Country This Week

North Star Health Alliance, which operates Ogdensburg’s Claxton Hepburn Medical Campus and Carthage Area Hospital, has filed for voluntary Chapter 11 bankruptcy protection, a move the system says is intended to keep its facilities open.

Meanwhile state officials say it’s time for the state to act.

Chapter 11 is not liquidation

The filing is a reorganization, not a liquidation, North Star officials said, and is meant to preserve operations and jobs while the system works through mounting financial and operational problems. All hospitals and care centers remain open.

“This action preserves and protects our ability to continue to operate all of our hospitals and care centers in the normal course,” the system said in a statement to employees.

North Star said the bankruptcy filing is intended to ease payment delays and support continued patient care. The system acknowledged that some employees and vendors have experienced delayed payments in recent weeks, but said the Chapter 11 process should help resolve those issues.

“We took this action with the aim to preserve patient care and employment,” the system said.

Officials said there are no plans to close facilities, reduce staffing or cut services. Any future changes, they said, would be subject to formal review and advance notice to employees, patients and the public.

North Star cited several factors behind its financial distress, including reimbursement delays tied to a transition to a critical access hospital payment model, rising operating costs, revenue collection problems at Claxton-Hepburn Medical Center, and multiple cyberattacks. Those issues, the system said, created a growing gap between the cost of care and the revenue coming in.

System leadership remains in place and is actively involved in the restructuring, officials said.

Calls for action

Assemblyman Scott Gray, whose 116th District includes Jefferson and St. Lawrence counties, called the filing “deeply troubling” for rural communities that depend on North Star for access to health care. He urged the state Department of Health to take immediate steps to stabilize the system.

“The services in this community need to be preserved, and vendors, especially local vendors, need reconciliation with what they are owed,” Gray said. “This moment requires urgency, clarity and leadership from the Department of Health.”

Gray said repeated attempts over several months to engage the health department had failed to produce what he described as a meaningful partnership. He noted that it has been three weeks since the system’s chief executive resigned and that a management services agreement aimed at stabilizing operations has yet to be finalized.

Sen. Dan Stec, R-Queensbury, supported Gray’s statement.

Heated hearing

During a state budget hearing Wednesday, lawmakers pressed Health Commissioner Dr. James McDonald on safety-net hospital funding and delays in payments to rural facilities. Gray said answers indicating funding decisions remain “pending” fall short given the stakes for patient access.

Gray called on the Department of Health to immediately finalize the management services agreement, deploy an on-site support team and provide a written timeline for safety-net funding decisions.

“The community deserves answers and action, not delays,” he said.

In response, McDonald said Gray was discounting the impact of failed leadership, though he acknowledged the department had received the information it said was needed to move forward on stalled funding. 

McDonald said he has been working closely with North Star officials and described his interactions with board member Chet Trusowsky as “a breath of fresh air.”

He also noted that he understood the decision to file bankruptcy.

“That type of protection is probably a very good thing for them right now,” he said.

He said he and his team were having private conversations with the hospital trying to find a sustainable path forward.

More than 120 employees have already lost their jobs amid the funding delays. While receivership appears increasingly likely, the Department of Health has shown little urgency in advancing the process.