North Star files for Chapter 11 bankruptcy
The North Star Health Alliance (NSHA) has filed for Chapter 11 bankruptcy for itself and three of its affiliates: Carthage Area Hospital, Claxton-Hepburn Medical Center in Ogdensburg, and Meadowbrook Terrace, an assisted living facility in Carthage.
In a press release sent out on Tuesday morning, the NSHA wrote the decision to file for Chapter 11 protection was a "difficult but necessary action to allow us to stabilize NSHA's finances" and to ensure access to "quality care close to home for communities throughout the North Country."
Chapter 11 bankruptcy is a voluntary legal filing that allows hospitals to restructure their debt while continuing operations. The practice has become more widespread in healthcare in the U.S. in the past few years. It's often triggered by high debt, trouble with collections, and rising operational costs.
New York State Assemblyman Scott Gray, who represents large portions of St. Lawrence and Jefferson counties, said this is a really disappointing development. "To say angry would be an understatement right now.”
Gray says the New York State Department of Health knew about North Star’s precarious financial situation, and hasn’t acted with urgency to help right the ship or release emergency funding. "There is no excuse," he said. "And you can say part of it is the responsibility of the management [of North Star]. Yes, that may be true, but we cleared the way for that three weeks ago."
Delayed state funding for North Star and 'failed leadership'
Three weeks ago is when North Star’s CEO Richard Duvall resigned.
That came after North Star failed to provide information about how it had used previous state funds, including 2024 audit statements, salary information, and intercompany transfers.
New York’s Health Commissioner, Dr. James McDonald, weighed in on the situation at a budget hearing in Albany on Tuesday.
"Quite frankly, the department has had 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 said the DOH had only recently received that information, after Duvall's resignation.
McDonald said the state has been “highly engaged” with North Star, and that North Star’s failure to work with the state led to this point. "So filing bankruptcy is something they chose to do," he said. "I understand what they did. And that type of protection is probably a very good thing for them right now. I cannot get into confidential conversations that I'm having with my team and them to try to find a sustainable path forward."
Assemblyman Gray pushed back during the budget hearing, saying that a ‘ temporary management services agreement’ has been on the table for weeks now, which would allow an outside provider to take over operating North Star facilities.
He says the state still hasn’t signed that agreement, even though there are New York providers willing to do that work.
"A sustainable path forward should have been a management agreement, [which] should have been executed weeks ago," he told McDonald.
"Respectfully, Assemblymember, I think you're discounting the impact of failed leadership there, which is really the critical issue," responded Commissioner McDonald.
What Chapter 11 bankruptcy means
The North Star Health Alliance says it's filing for Chapter 11 protections because of a series of "complex events" that led to a significant gap between operating costs and revenue received.
"This gap was caused by, among other things, delays in payments while transitioning to a critical access hospital reimbursement model, increased operating expenses, a challenging legacy model of revenue collection at Claxton-Hepburn Medical Center, and other external pressures such as multiple cyber attacks," the statement reads.
The NSHA said that its facilities will continue to operate normally, with "continuity of all essential medical, surgical, behavioral health, and assisted living services." It also said that employees will continue to receive their regular pay and benefits.
Chapter 11 bankruptcy essentially allows a hospital to keep operating as it attempts to recover financially. It's often triggered by high debt, trouble with collections, and rising operational costs.
"It's a last resort," said Amanda Geary. She teaches business law at Clarkson University and is a practicing attorney. "So it basically puts a pause on any claims from creditors and gives them time to reorganize finances...and get their feet back under them, basically."
Geary says that filing for bankruptcy doesn’t necessarily mean hospitals are going to close.
"Most commonly, from what I have seen, is [hospitals] just trying to get back to financial stability to keep the hospital up and running," she said. "Any shutdown is obviously drastic and Chapter 11's entire goal is to avoid that."
As North Star restructures its debt, Assemblyman Gray says he’s concerned about the impact on local businesses and vendors and the North Country economy.
"My concern is the amount that's owed to those people being at risk," said Gray. "We don't need to complicate the whole situation of the financial condition of this facility and then spread it out like a like a spider's web in the community and impact all these other businesses."
Whether a state triage team or a different provider could step in to stabilize North Star remains an open question mark.
Shaky financial ground since December 2025
The NSHA has been on shaky financial ground for months. In early December, it announced it was nearing "imminent closure" and said it was unsure if it could make its next payroll.
It blamed the financial shortfall on lost revenue as Claxton-Hepburn transitioned into two, co-located hospitals, and on delayed VAPAP (Vital Access Provider Assurance Program) grants from the New York State Department of Health (DOH).
The DOH said that payments were paused because the North Star Health Alliance had been unwilling to provide "basic information" about how previous state funds had been used.
The CEO, Richard Duvall, resigned in mid-January, just days after the NSHA announced layoffs of about 120 employees.
The 1199SEIU United Healthcare Workers East, the union representing employees at Carthage Area Hospital and Claxton-Hepburn Medical Center, sent a letter to the state's Department of Health on Feb. 2, urging immediate state intervention to stabilize the North Star Health Alliance.
The letter, which was also signed by over 1,600 community members, patients, and healthcare workers from St. Lawrence, Lewis, and Jefferson Counties, called for action "by any means necessary," including the appointment of a local receiver to maintain services, if needed.
As the North Star Health Alliance files for bankruptcy protections, it wrote that it "will continue to engage proactively with the Department of Health to reach a timely, workable solution that protects continuity of care for our patients."
