BY JIMMY LAWTONNorth Country This Week

OGDENSBURG — Northern Credit Union is objecting to North Star Health Alliance’s plan to use operating funds in its Chapter 11 bankruptcy, saying the proposed safeguards don’t adequately protect its $3.1 million line of credit. 

Northern Credit Union, which provided the system’s line of credit, said it had no advance notice of the bankruptcy filings and objected to the health system’s request to use cash collateral.

The objection came after North Star and affiliated nonprofit providers filed for bankruptcy in federal court. It’s unclear at this time what impact that objection will have on the bankruptcy proceedings. 

The bankruptcy filings  include North Star Health Alliance, Carthage Area Hospital, Claxton-Hepburn Medical Center  and Meadowbrook Terrace.  In a ruling today the court agreed to combine the filings.

Together, the organizations employ about 1,600 people and provide hospital care, behavioral health services, and long-term care across Jefferson and St. Lawrence counties.

North Star said that the Chapter 11 filings are intended to allow the system to continue operating while restructuring debts, not to sell off assets or close facilities.  

The filings cite a widening gap between operating costs and revenue.  Delayed payments tied to a shift in reimbursement models, rising labor and supply costs, lingering billing issues, and multiple cyberattacks all contributed to the financial strain, documents say.

On Feb. 11, North Star requested that the court approve joint administration of the four bankruptcy cases, a move they hoped would streamline the process while keeping each organization’s finances legally separate. 

North Star officials maintain that Chapter 11 will help stabilize the health system, preserve local healthcare jobs, and protect access to care for North Country communities, including Fort Drum service members and their families.

Bankruptcy proceedings are ongoing, and future court hearings will determine how the system can continue operating while negotiating with lenders and other creditors.

Meanwhile the organization is still awaiting word from the Department of Health on how to proceed with receivership or affiliation.

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.

In a recent report WWNY said the Morristown clinic, which is operated by North Star, has closed.