Partners HealthCare System can move forward with acquiring 140-bed Cooley Dickinson Hospital in Northampton, the state attorney general’s office said Friday.
But under an agreement struck with the office, which was concerned about market dominance and rising health costs, the two organizations will have to negotiate separate contracts for five years with the commercial health insurers that reimburse them for service.
The parties disclosed the pact after a separate antitrust review of their merger by the US Justice Department had ended without action, allowing the alliance to proceed.
The acquisition has also been approved by the state Department of Public Health but can’t be completed until a new state agency, the Health Policy Commission, weighs in. That commission, which is focused on containing health cost increases and monitoring competition in the health care market, is set to decide by June 6 whether to conduct its own inquiry.
“We’re one step closer to this being a reality,” said Peter L. Slavin, president of Partners-owned Massachusetts General Hospital, who has been leading the talks with Cooley Dickinson.
If the Cooley Dickinson deal is consummated, it would be the first hospital takeover for Boston-based Partners, the largest hospital and physicians organization in Massachusetts, since it acquired Martha’s Vineyard Hospital and Nantucket Cottage Hospital in 2006.
Partners, one of the state’s highest-paid health care systems, also owns Brigham and Women’s, Faulkner, McLean, and Newton-Wellesley hospitals, Spaulding Rehabilitation Network, and North Shore Medical Center. Last year, in its first foray into health insurance, Partners acquired Neighborhood Health Plan, which insures 240,000 residents across the state.
While rival health care providers such as Beth Israel Deaconess Medical Center and Steward Health Care System have aggressively built up their community hospital networks in recent years, Partners has stayed mostly on the sidelines, inhibited by the perception that state regulators would frown on its further expansion for fear it could boost costs and lessen competition.
More recently, as hospital consolidation has accelerated, Partners has agreed to acquire the 378-bed South Shore Hospital in Weymouth in addition to Cooley Dickinson.
It also has been talking to Hallmark Health, the parent of Wakefield Hospital and Lawrence Memorial in Medford, about another potential combination. None of those deals has been completed.
But the conclusion of the state attorney general’s and Justice Department’s reviews makes it much more likely that the Cooley Dickinson acquisition will close.
Under the state’s new health cost containment law, the Health Policy Commission was not given explicit authority to block mergers, though it was authorized to refer concerns to the state attorney general.
That would seem unlikely now that the attorney general’s office has given its blessing to the deal.
The AG’s condition that Partners and Cooley Dickinson continue to negotiate separate contracts with Massachusetts health plans, meant to prevent the Northampton hospital from capitalizing on Partners’ clout to boost health care prices, expires in five years.
“A five-year period . . . gives greater opportunity for the Western Massachusetts market to adjust to the changes occurring in health care,” said Brad Puffer, a spokesman for the attorney general’s office.
Justice Department spokeswoman Gina Talamona said the department examined the proposed alliance but chose to take no action to stop it “because the parties’ agreement with the state of Massachusetts alleviated the [US] antitrust division’s competitive concerns.”
Cooley Dickinson, like the two island hospitals, would become part of Mass. General, the Harvard-affiliated Boston hospital that already works with Cooley on several clinical programs.
“We want to increase access to care here in Northampton,” said Craig Melin, president of Cooley Dickinson, suggesting the alliance with Mass. General would strengthen clinical programs. “We want to be able to do more things here so people don’t have to travel at all for care.”
Slavin said Mass. General and Cooley Dickinson plan to expand joint clinical services such as cancer programs and a “telestroke” program in which doctors in Northampton can consult via video with neurologists at Mass. General.
He also said the hospitals will work together on “population health management,” taking financial responsibility for patients under separate risk-sharing insurance contracts.
And the parties will work to lower costs through joint purchases of supplies, he said.
“We’re looking at ways to reduce the unit cost of care at Cooley Dickinson,” said Slavin. “They can benefit from our economies of scale.”
While they have not agreed on how to brand the Northampton hospital after it joins Mass. General, Melin said Cooley Dickinson will try to preserve local control and identity.
“We’re really trying to maintain the Cooley Dickinson presence in the community, but let people know we have the backing of Mass. General,” he said.
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