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                                                                  Exhibit 99.3

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 8-K

                                 CURRENT REPORT


     PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Date of Report (Date of earliest event reported):    August 14, 1997





                        NORTHSTAR HEALTH SERVICES, INC.
               (Exact name of registrant as specified in charter)


DELAWARE                            0-21752                       25-1697152
(State or other                 (Commission File                (IRS Employer
jurisdiction of                     Number)                  Identification No.)
incorporation)



665 PHILADELPHIA STREET, INDIANA, PENNSYLVANIA                         15701
(Address of principal executive offices)                             (Zip Code)



Registrant's telephone number, including area code:  (412) 349-7500





                                 Not Applicable
          (Former name or former address, if changed from last report)



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ITEM 5.  OTHER EVENTS.

         Shareholder Litigation

         The Company has reached a preliminary settlement which, if confirmed,
         will resolve all of the eight shareholder suits currently pending
         against the Company. These shareholder suits were initiated after
         certain accounting irregularities were discovered early in 1996. These
         discoveries resulted in the resignations of the Company's former
         independent public accountants and two Directors of the Company,
         including then Chairman and Chief Executive Officer, Mark A. DeSimone.

         The suits, which originally sought more than $20 million in damages,
         will be settled for $6.45 million. Substantially all of the Company's
         share of the proposed settlement fund ($1.1 million) will be covered
         by its director and officer liability insurance. The balance of the
         fund will be covered by other parties and their insurers.

         Final judicial confirmation of these settlements is scheduled for
         November 7, 1997.

         Forbearance Agreement and Related Matters

         On August 18, 1997, the Company and some of its subsidiaries entered
         into a Forbearance Agreement with IBJ Schroder Bank & Trust Company
         ("IBJ") with respect to certain defaults currently existing under a
         Credit Agreement, dated as of October 20, 1997 (as amended, the
         "Credit Agreement"), between the Company and IBJ, as both lender and
         agent.  Pursuant to the terms of the Forbearance Agreement, IBJ will
         forbear in certain respects in the enforcement of the remedies
         available to IBJ under the Credit Agreement through August 31, 1997,
         provided that the rights of IBJ are not waived or impaired.

         New Executive Officers Appointed

         The Company has filled three key executive positions. Frank J.
         Spramelli, 51, currently Vice President for Development of Three
         Rivers Health Plan, a Pittsburgh HMO, will join the Company in
         September as its Executive Vice President and Chief Administrative
         Officer. Lisa S.  Guarino, 38, currently a consultant to the Company,
         will resume her former duties as the Company's Chief Financial
         Officer. Michael J.  Fournier, 32, an experienced occupational
         therapist who most recently managed his own enterprise, has been named
         President of the Company's long term care subsidiary, Keystone
         Rehabilitation Management.





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ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS.

         (a)  Financial Statements of businesses being acquired:  None.

         (b)  Pro Forma financial information:  None.

         (c)  Exhibits:

                  99.1   Press release, dated August 14, 1997, issued by the
                         Company regarding the preliminary settlement of the
                         shareholder suits.

                  99.2   Press release, dated August 19, 1997, issued by the
                         Company regarding the Forbearance Agreement and the
                         appointment of new officers.



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                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.



                                             NORTHSTAR HEALTH SERVICES, INC.



                                             /s/ Thomas W. Zaucha
                                             ----------------------------
                                             Name:  Thomas W. Zaucha
                                             Title: Chief Executive Officer and
                                                    President

August 21, 1997



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                                 EXHIBIT INDEX

Exhibit                                                                 Page
-------                                                                 ----

   99.1    Press  release,  dated August 14, 1997,  issued by
           the Company  regarding the preliminary settlement
           of the shareholder suits.......................................5

   99.2    Press  release,  dated August 19, 1997,  issued by
           the Company  regarding the Forbearance Agreement
           and the appointment of new officers............................6




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Contact:          Thomas W. Zaucha, CEO
                  Northstar Health Services, Inc.
                  (412) 465-3201

                  Tracey L. Missien, Director of Marketing Northstar Health
                  Services, Inc.  (412) 465-3711

                                                           FOR IMMEDIATE RELEASE

                  NORTHSTAR HEALTH SETTLES SHAREHOLDER CLAIMS

INDIANA, PA - August 14, 1997 - Northstar Health Services, Inc. (NSTR:OTCBB)
today announced a preliminary settlement which, if confirmed, will resolve all
of the eight shareholder suits currently pending against the Company. The
suits, which had originally sought more than $20 million in damages, were filed
following the Company's discovery early in 1996 of certain accounting
irregularities. These discoveries, in turn, led to the resignations of the
Company's then Chairman and Chief Executive Officer Mark DeSimone, an Executive
Vice President and an outside director.

Substantially all of the Company's share of the proposed $6.45 million
settlement fund will be covered by its director and officer liability
insurance, with other parties and their insurers funding the balance.

Thomas W. Zaucha, who became the Company's Chief Executive Officer in 1996
after the resignation of his predecessor, stated, "This settlement removes a
significant cloud over Northstar's financial future, and positions us to
restructure our debt and attract new sources of financing. With the litigation
behind us, our plan now is to focus on our core business of physical therapy
and rehabilitation, and improve operating margins, creating a basis for
measured expansion."

Today's announcement came following a hearing before the U.S. District Court in
Pittsburgh, where seven of the suits have been consolidated. Terms of the
settlement will now be forwarded to members of the plaintiff classes involved
in the suits, who will have the opportunity to opt out of the proposal if they
elect to do so. Final judicial confirmation of these settlements is scheduled
for November 7, 1997. In connection with the settlement, the Company will also
settle its claims against Mr. DeSimone and others.

Northstar Health Services, Inc. is a leading regional provider of physical
rehabilitation, mobile diagnostics and contracted long term care services at
outpatient rehabilitation clinics and by contract to other healthcare
facilities in Pennsylvania, Ohio and West Virginia.




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Contact:          Thomas W. Zaucha, CEO
                  Northstar Health Services, Inc.
                  (412) 465-3200

                  Tracey L. Missien, Director of Marketing 
                  Northstar Health Services, Inc.
                  (412) 465-3710

                                                           FOR IMMEDIATE RELEASE

                    NORTHSTAR HEALTH ANNOUNCES NEW OFFICERS;
                 SIGNS FORBEARANCE AGREEMENT WITH SENIOR LENDER

INDIANA, PA -- August 19, 1997 -- Northstar Health Services,  Inc. (NSTR:
OTCBB) today  announced  that it has appointed  three key  executives to its
management team.

Frank J. Spramelli, 51, currently Vice President for Development of Three
Rivers Health  Plan, a Pittsburgh  HMO,  will be joining  Northstar in
September as its Executive  Vice  President  and  Chief  Administrative
Officer.  Mr.  Spramelli previously  served as President and Chief Executive
Officer of Philipsburg Area Hospital.  He holds a Masters degree in Public
Administration from Shippensburg University.

Lisa S. Guarino, 38, currently serving as financial consultant to Northstar,
has agreed to resume her former duties effective September 1, as Northstar's
Chief Financial Officer. Ms. Guarino is a Certified Public Accountant and holds
an MBA from Indiana University of Pennsylvania. Ms. Guarino served as Chief
Financial Officer of Northstar from November 1995 to September 1996 and had
previously served as Controller and CFO of Keystone Rehabilitation Systems,
Inc. since October 1986. Her auditing experience was obtained through Arthur
Andersen LLP from 1980 to 1983.

Michael J. Fournier, OTR/L, 32, has been named President of the Company's long
term care subsidiary, Keystone Rehabilitation Management. Mr. Fournier,
employed as an occupational therapist by Keystone Rehabilitation Systems, Inc.
for six years, most recently was Facility Director of the Indiana, PA
outpatient facility and a practicing clinician in several of the company's long
term care contract locations.

Commenting on these appointments, Thomas W. Zaucha, Chairman and CEO of
Northstar said, "These executives will bring new expertise, experience and
energy to Northstar. They will give our management team the depth and resources
we need to serve our therapists in the field, and to manage our
responsibilities in both the communities we serve and in the financial
community."

The Company also announced that it has entered into a Forbearance Agreement
with its senior lender and largest creditor, IBJ Schroder Bank & Trust Company,
pursuant to which the bank has agreed not to enforce its rights under its
credit agreement with the Company through August 31, 1997, subject to extension
in the sole discretion of the bank. The Company has been in default of its
obligations under the credit agreement since its discovery, early in 1996, of
certain accounting

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irregularities but, as part of the Forbearance Agreement, the Bank has waived
its right to default interest during the period covered thereby.

Thomas Zaucha further added, "With this agreement, Northstar has taken an
important step toward normalization of its financial affairs. We hope it will
lead to a permanent reconfiguration of Northstar's entire capital structure,
including new cash infusions, as well as a reshaping of existing debt."

In recent weeks, Northstar has also announced the final resolution of its
recent contest for corporate control, as well as a global settlement, subject
to final confirmation, of the shareholder litigation against it that began in
1996. Mr.  Zaucha noted, "A bleak and difficult period in this company's
history is now drawing to a close. Challenges lie ahead, but today we know that
we are on the road back to health."

Northstar Health Services, Inc. is a leading regional provider of physical
rehabilitation, mobile diagnostic testing and contracted long term care
services as outpatient rehabilitation clinics and by contract to other
healthcare facilities in Pennsylvania, Ohio and West Virginia.