BY JIMMY LAWTONNorth Country This Week

OGDENSBURG — North Star Health Alliance is facing a projected negative cash balance of more than $16 million by late May, according to a recent court filing..

The 13-week cash flow projection, submitted as part of a motion to authorize the use of cash collateral, shows that expenses consistently exceed incoming cash. 

The report projects the North Star’s cash balance will drop from roughly $4.6 million at the start of the period to a more than $16 million negative balance by mid-May.

The filing also highlights ongoing operational challenges. 

“The projections are based on information provided by management. We have not audited or independently verified such information but have reviewed it for reasonableness. Actual results may differ materially,” notes on the document say.

It also noted inconsistencies with “revenue recognition.”

“We continue to experience issues related to receiving timely, accurate, and complete information from management,” the document says.

To address the projected shortfall, North Star Health Alliance is exploring multiple options. These include working closely with the New York State Department of Health to maintain operations, seeking “Debtor-in-Possession financing” to cover immediate cash needs, and evaluating potential organizational downsizing to reduce operating costs, which means more cuts could be ahead.

Although not independently confirmed by North Country This Week, sources say that more than 70 employees have resigned or been laid off by North Star since the initial round of 120 layoffs in February.

Creditors object

The financial outlook is also raising flags in the request to continue using cash as collateral. The official committee representing unsecured creditors and M&T Bank have both filed objections.

The unsecured creditors’ committee, appointed by the U.S. Trustee Program, includes the New York State Nurses Association, AMN Healthcare, Medline Industries, PeriGen, and Ovation Healthcare. 

The committee says it is not opposed to the hospitals using cash collateral but wants more time to review the books and understand the system’s financial structure. 

The committee says thecurrent court orders give Northern Credit Union too much control over how funds are used, block investigations into secured liens, and allow lenders to claim assets normally reserved for unsecured creditors.  Notably, Gary Rowe serves on  the North Star Health Alliance and Northern Credit Union governing boards.

They are asking for a 90-day review period, weekly financial reporting, and budgeted funding for their legal and financial advisers.

M&T Bank has also objected. Its 2018 revolving loan to Carthage Area Hospital is secured by the hospital’s operating accounts, and the bank says current orders do not adequately protect its interests. The bank says stronger protections must be in place before any cash moves.

The bankruptcy court scheduled today will decide whether North Star can continue using cash tied to secured lenders and under what restrictions. 

Approval Sought for Wintergreen Team Amid Conflicts

North Star Health Alliance is asking the bankruptcy court to formally approve the hiring of Wintergreen, Inc., and several other advisers to manage its Chapter 11 reorganization, including retroactive approval for work already performed. 

Robert Bloom, a principal at Wintergreen, serves as Chief Restructuring Officer for the hospitals and Chief Financial Officer at Carthage Area Hospital. Wintergreen is also a creditor, raising potential conflicts, and the team is authorized to bill $250 to $450 per hour.

Plans to hire Wintergreen have drawn criticism from former and current employees as well as Assemblyman Scott Gray and former Carthage Hospital CEO Walter Becker.

The hospitals have also retained Verrill Dana LLP as special conflicts counsel, though the firm previously represented Wintergreen in drafting Bloom’s engagement letter, limiting its ability to act against the company. Bousquet Holstein PLLC, long-time corporate counsel, is similarly a creditor with outstanding pre-bankruptcy fees, though the hospitals say its institutional knowledge is vital for ongoing litigation. 

The court will review the requests in the coming weeks, with any approval backdated to February 10.