North Star Health Alliance, a nonprofit health system in northern New York, and its affiliates have filed for Chapter 11 bankruptcy.
The system includes two 25-bed critical access hospitals (CAHs), a standalone psychiatric hospital, an assisted living facility and an orthopedic group.
Of note, the system in 2024 had split its 170-year-old Claxton-Hepburn Medical Center into two separate, co-located facilities (a psychiatric hospital and a CAH). That triggered a revenue shortfall when the state’s Department of Health paused multimillion-dollar grants, claiming that the system had failed to provide necessary financial information on how it was using state funds.
In a press release announcing the bankruptcy, North Star cited the transition-related payment delays at the top of its explanation of its financial shortfall. Other factors included higher operating expenses, a “challenging legacy model of revenue collection” and multiple cyberattacks.
The system said it plans to continue day-to-day operations through the process, adding that patients can expect normal access and care continuity while employees maintain regular pay and benefits.
“We are taking this step to safeguard what matters most—quality driven care available close to home and the preservation of essential healthcare careers that support local families and anchor our North Country economy,” Chet Truskowski, chairman of the system’s board, said in the release. “This court‑supervised restructuring puts us on a path to stabilize our finances while preserving essential services and protecting our workforce.”
North Star last month announced layoffs affecting 120 of its clinical, nonclinical and management employees, which was shortly followed by the resignation of its CEO Richard Duvall.
Last week, the system needed emergency support from the state in order to make two-week payroll for its 1,600 employees.
The bankruptcy filing landed as New York Department of Health Commissioner James McDonald, M.D., was testifying to state lawmakers. In response to questioning from Scott Gray, a Republican assemblyman representing the community served by North Star, McDonald said the information requests that led to the grant pause were “very simple questions we’ve been trying for a very long time to get answers to, that any organization should be able to answer.”
He added that the department had only recently received the information it was requesting, and noted its role in the more recent payroll support.
“Whatever we want to say, it doesn’t matter today. They filed bankruptcy,” Gray said.
“Respectfully, assemblymember, I think you’re discounting the impact of failed leadership there, which is really the critical issue,” McDonald responded.
Other New York lawmakers have said in statements that preserving care in the rural area is the priority going forward, with state Sen. Mark Walczyk adding that “The Department of Health needs to stop moving the goalposts and changing timelines. Healthcare and jobs at [the hospitals] hang in the balance.”