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The Boston Globe

Business

Analysis

Settlement with broad implications no longer clear

Representatives of Attorney General Martha Coakley and Partners HealthCare spent millions of dollars and thousands of hours over the past five years — first preparing to face off in an antitrust suit and then negotiating a settlement — in a process shrouded in secrecy.

Now their deal, to allow Partners to acquire Weymouth’s South Shore Hospital and Hallmark Health System’s two hospitals while capping prices and further growth, is under a spotlight. It faces scrutiny not only in a state court but in the court of public opinion.

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Partners’ competitors, initially slow to react to the pact, have mounted a challenge to an agreement that seemed inevitable only a few weeks ago.

At a hearing Monday, they won a delay of at least a month before there can be a final resolution to the Massachusetts and federal probe of the state’s dominant hospital and physicians network. A Suffolk Superior Court judge, Janet L. Sanders, opened a three-week period for public comment, ensuring a high-profile debate.

Then, on Wednesday, the state Health Policy Commission raised fresh doubts about the agreement. The panel, created by the state’s 2012 cost-containment law, accepted a preliminary report warning that Partners’ planned acquisition of Melrose-based Hallmark would raise health spending by $15 million to $23 million a year and boost employer and consumer premiums.

The commission, which has no power to block the merger, will probably refer its findings to Coakley’s office, which has already agreed to take them into account in its final settlement with Partners.

That means at least part of the agreement could be reopened. What once looked like a done deal — comprehensive if imperfect — may no longer be a sure thing.

Coakley’s lieutenants and executives from Boston-based Partners, who haggled for months over the terms of the settlement, now find themselves on the same side in defending it.

But there is a chasm between how they perceive the pact and how it is seen by rival hospitals and physician groups, such as Atrius Health, Beth Israel Deaconess Medical Center, Lahey Health, and Tufts Medical Center. All of those competing health care systems, though united in their opposition to Partners getting bigger, have been expanding their own networks.

Coakley argues the settlement places the first effective restrictions on Partners’ price increases. The competitors maintain it does little to reduce the disparity between what they charge for medical care and what is charged by the Partners doctors and hospitals, including Massachusetts General and Brigham and Women’s, both in Boston.

The deal will allow the state’s largest health system to become larger. But it will also inhibit its contracting clout and force the system to revamp the way it delivers medical care, under the watchful eyes of a monitor.

That sets up a stark choice for Sanders. The judge must approve or reject a settlement of a law enforcement investigation that, while focusing on Partners, will set ground rules for the entire Massachusetts health care industry for the next decade.

If history is any precedent, she can be expected to approve it on or after an Aug. 5 hearing she has scheduled to consider the pact and public comments. Judges almost never second-guess settlements negotiated by the attorney general.

But much of what has happened over the past few weeks already has broken with precedent.

Sanders’ decision to allow public feedback in a business litigation case was unusual. So was the public alliance formed by Partners’ rivals and the impassioned attack on the settlement launched by health care leaders typically loath to criticize fellow members of the clubby hospital industry — let alone a sitting attorney general who is running for governor.

Sanders is not empowered to modify the antitrust settlement. But if she can be persuaded the pact is not legal or not in the public interest — a finding that would require a deep dive into the arcane world of health insurance contracting, market share, and physicians’ affiliations — she could reject it.

That would force Coakley’s office to renegotiate the settlement with Partners, appeal the case to a higher court, or drop it altogether.

Health care officials are reluctant to predict the outcome.

“How the court process plays out is above my pay grade,” said the Health Policy Commission’s chairman, Stuart Altman, who will submit the panel’s findings to Coakley and ultimately to the judge.

Coakley, an early critic of Partners’ market power and contracting practices, has much at stake. Rejection of the settlement would be a setback just before the Democratic gubernatorial primary. It would also call into question the ability of her office to restrain the market clout of a health system she has accused of pushing up costs.

To bolster her office’s case, Deputy Attorney General Chris Barry-Smith told Sanders Monday that the settlement had the blessing of the US Department of Justice. And the department, for the first time lending its imprimatur to the settlement, authorized the attorney general’s office to share a statement with the Superior Court.

“Recognizing that Massachusetts has a unique regulatory system, DOJ supports our efforts here and the conclusions we have reached . . . ” Barry-Smith said. “DOJ has coordinated closely with us throughout our investigation, which has been exhaustive and which has resulted in a comprehensive settlement.”

Whether that will be enough to push the pact over the finish line remains to be seen.

Robert Weisman
can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW. Priyanka Deval McCluskey of the Globe staff contributed to this story.

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