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Panel opposes Partners expansion on South Shore

State agency says health network would drive costs up, curtail competition

South Shore Hospital in Weymouth.

South Shore Hospital

South Shore Hospital in Weymouth.

A state watchdog agency, in a rare rebuke to Partners HealthCare System, is expected on Wednesday to advise against Partners’ aggressive plan to take over South Shore Hospital and a nearby doctors group, saying the acquisitions would push up patients’ costs and stifle medical care competition in the region.

A report by the year-old Massachusetts Health Policy Commission details what might happen if Partners is allowed to acquire the 378-bed Weymouth hospital and a Partners-owned physicians group absorbs Harbor Medical Associates, which has 65 doctors on the South Shore.

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It concludes Partners’ South Shore moves would not only increase premiums for consumers and employers and weaken rival providers, but also threaten the state’s ability to hit its overall target for holding down medical spending, according to several people briefed on the findings. Those people spoke on condition of anonymity because the report is not yet public.

The commission, created under the state’s 2012 cost containment law, lacks the authority to block Partners’ moves, but its findings come at a critical time for other regulators who do have that power.

The US Department of Justice and the state attorney general’s office are winding up a joint four-year investigation of alleged anticompetitive practices at Partners, the state’s largest hospital and physicians organization, and will pay close attention to the commission’s report.

Federal and state antitrust regulators could sue Partners in an attempt to scuttle the acquisitions if they are deemed harmful to competition. Their inquiry revolves around whether the deals unfairly tilt the marketplace in favor of Partners, while the Health Policy Commission’s report also examined the impact on consumers and the state’s economy.

Though the scopes of their reviews differ, there have been informal talks between representatives of the commission and investigators from the Justice Department and Attorney General Martha Coakley’s office, said the people familiar with the report.

David Seltz, the commission’s executive director, declined to talk about his agency’s “cost and market impact review” prior to its release. Representatives from Coakley’s office and the Justice Department would not comment, either.

A consensus by investigators that Partners’ growing size and clout threaten to drive up costs could slow the pace of health care industry consolidation in Massachusetts — and beyond — after years of “vacillation” by antitrust regulators, said Alan P. Sager, professor of health policy and management at Boston University’s School of Public Health.

“If you believe competition between hospitals and among doctors groups can hold down costs, then you need more competition,” Sager said. “The effort by Partners to bring in South Shore Hospital and Harbor Medical would increase their power to win higher prices.”

Rich Copp, a Partners vice president, on Wednesday said executives there had not yet seen the commission’s report. But he defended Partners’ plans on the South Shore.

“Our proposal will improve the care that patients in Southeastern Massachusetts will receive as we invest in primary care and electronic medical records, resulting in more coordinated and cost-effective care,” Copp said.

A state analysis released earlier this year showed that nearly one-third of the money Massachusetts insurers spent on acute hospital care last year went to Partners, which is based in Boston and boasts 6,000 doctors and 10 hospitals, including Massachusetts General and Brigham and Women’s. Partners-affiliated doctors received 25 percent of the money paid to physicians statewide in 2011, the analysis said. That report was produced by the state Center for Health Information and Analysis, which also supplied data for the Partners-South Shore review.

Commission staffers preparing the report, scheduled for release Wednesday, were told that Massachusetts health insurers believe the proposed Partners takeovers would push up prices on the South Shore, based on the track record of previous hospital consolidations, industry executives said.

Partners has argued its plan to expand on the South Shore — as well as a more recently disclosed proposal to acquire Hallmark Health System’s two community hospitals north of Boston — will ultimately lower costs by improving health care delivery and coordination.

Some economists have cited the greater efficiency of larger health care systems as one factor holding down price increases over the past several years. Recent state and federal laws, as well as newly designed health insurance contracts, have given hospitals and doctors incentives to better coordinate their care and reward them for improved quality and patient outcomes.

Against that backdrop, the commission “would have to make a good case that these transactions are going to decrease competition and increase costs,” said health care consultant Harry Glorikian, managing director of Scientia Advisors in Cambridge. He contended large integrated hospital systems in other states have helped rein in cost increases.

“Health care doesn’t follow the same rules as the cellphone or computer markets,” he said. “If we have better-coordinated care and the incentives are aligned, that should cost the system less.”

The commission’s report will acknowledge that Partners has had success in containing price increases, especially among the highest-cost patients, through better analysis and coordination, said those briefed on it. They said it will also classify both Partners and South Shore Hospital, which has long had a clinical affiliation with Brigham and Women’s, as high-quality health care providers, but maintain that would continue without a merger.

The commission is charged with seeking to limit the annual per-capita increase in health spending to the state’s economic growth, projected to be 3.6 percent in 2013.

A staff inquiry in May, before the commission moved forward with its full review, warned a Partners takeover of South Shore Hospital could jeopardize that goal.

“Given Partners’ size and high costs, an expansion of the system to include South Shore Hospital, a large, high-cost community hospital, is likely to have a significant impact on the Commonwealth’s ability to meet its health care cost growth goals, and on the competitive market,” said the commission’s summary of the inquiry.

Health care industry watchers say this week’s report could trigger a back-and-forth battle of briefs between the commission and Partners, with both sides seeking to convince the public — and antitrust investigators waiting in the wings — of their differing views on how the South Shore transaction would affect costs.

Technically, the findings are being deemed preliminary, giving Partners a chance to respond within 30 days before the final report is issued.

“This preliminary report creates an opportunity to begin a meaningful dialogue around our vision to reduce health care costs,” said Partners’ Copp.

Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW.
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