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Experts call on judge to block Partners’ hospital takeovers

Partners HealthCare System plans to take over South Shore Hospital (pictured) and Hallmark Health System.

Zack Wittman for The Boston Globe/file

Partners HealthCare System plans to take over South Shore Hospital (pictured) and Hallmark Health System.

Twenty-one national antitrust experts and health economists are calling on a Massachusetts judge to block Partners HealthCare System’s planned takeovers of South Shore Hospital and Hallmark Health System, warning that an agreement reached between Attorney General Martha Coakley and Partners to allow the deals is unlikely to contain rising medical costs.

The antitrust specialists — who teach at major universities, from Harvard and Yale to Northwestern and Stanford — said they consider the Partners case a high-profile test of regulators’ ability to promote competition in a market dominated by a powerful hospital and physicians network.

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None has a financial stake in the settlement, filed last month in Suffolk Superior Court.

“We do not believe that the proposed restrictions on Partners’ conduct included in the [settlement] will offset the consumer harm that is likely to arise from the acquisitions of South Shore and Hallmark hospitals and their physician affiliates,” they wrote in a petition to Judge Janet L. Sanders.

She has extended a public comment period through Sept. 15 and scheduled a Sept. 29 hearing to discuss whether to approve the settlement.

Brad Puffer, a spokesman for Coakley, defended the pact, saying it is preferable to suing to block the mergers because the deal restricts Partners’ business practices more broadly. He noted the attorney general’s office worked with the US Department of Justice to assess the impact of the mergers on the state’s health care market.

“We considered all of the facts in the context of the lawsuit we could have brought and the remedies we could have potentially achieved,” Puffer said. “The economists who submitted this letter unfortunately fail to recognize many of the legal factors we had to consider while making our decision. We are confident that this [settlement] does more to control health costs for consumers and alter Partners’ business practices than any lawsuit would have potentially achieved.”

More than 60 parties have already submitted comments on the settlement, including a former attorney general, Thomas F. Reilly, who called it “impressive” and said that Coakley “is acting appropriately and in the public interest” under difficult circumstances.

The pact ended a five-year state and federal probe of Partners’ allegedly anticompetitive behavior, including charges the system used its market clout to charge more than other hospital groups for the same services.

Under the settlement, Partners would be allowed to complete its acquisitions of three more community hospitals: South Shore Hospital in Weymouth and Hallmark’s Lawrence Memorial Hospital in Medford and Melrose-Wakefield Hospital.

But the deal puts a seven-year freeze on additional takeovers, except for Emerson Hospital in Concord, which is already affiliated with Partners.

And it limits price increases across the Partners network, including at Massachusetts General and Brigham and Women’s hospitals, to the rate of general inflation for 6.5 years. It also calls for an outside monitor to gauge Partners’ compliance for 10 years.

A coalition of competitors — it includes Lahey Health, Beth Israel Deaconess Medical Center, Tufts Medical Center, and Atrius Health — has been highly critical of the settlement.

While the debate until now has largely been between those allied with or competing against Partners, the antitrust specialists, some of whom formerly worked at federal agencies regulating competition, say they are making an independent assessment.

Leemore Dafny, a Northwestern University Kellogg School of Management professor and former Federal Trade Commission official who co-wrote the petition, said she invited colleagues from other universities to sign it only if they had no commercial interest in the case.

Dafny said an established consensus in the antitrust field is that “structural remedies,” such as preventing or dissolving mergers, spur competition more effectively than “conduct remedies,” such as those Coakley’s office negotiated, which require ongoing oversight.

“This is a regulatory solution that’s unprecedented in its scope,” Dafny said of Coakley’s pact with Partners. “It’s an attempt by the attorney general to remedy 20 years of behavior stemming from the merger that created Partners. This is a central planner’s approach to the health care system. And in our opinion, it’s not the way to go.”

The antitrust specialists make three points:

 Health care mergers nationally haven’t led to better efficiency or lower costs.

 Partners’ track record and its post-acquisition plans for controlling costs don’t inspire confidence.

 The agreement does too little to keep Partners from wielding the additional market power that would result from the hospital takeovers.

“Hospital mergers have consistently failed to generate the benefits promised by their proponents . . . ” they wrote. “There is no convincing evidence to date that combining physicians and hospitals under common ownership tends to result in cost savings.”

Partners vice president Rich Copp did not respond directly to the experts’ comments. But he said Partners’ planned mergers will improve patient care.

“A complete and thorough discussion of this topic should include the benefits that come from affiliations among integrated health systems like Partners and community-based hospitals and doctors,” Copp said. “And our vision will offer future support for South Shore Hospital and Hallmark Health System. Working together, we will better coordinate care delivered to patients and families in those communities closer to their homes at lower cost.”

The petition was sent to Sanders through Coakley’s office, which is collecting public comments to forward to the judge by Sept. 25, along with the attorney general’s responses. Many of the comments come from parties or politicians aligned with Partners or with rival hospitals and doctor practices that oppose the pact.

Reilly, in his comments, disclosed tht he has represented Partners as a lawyer on a limited basis in unrelated matters. He acknowledged the health care organization was “large and dominant” when he was attorney general. But, he said, “we faced serious challenges to a successful prosecution under the antitrust laws in place at that time.”

While those challenges remain, Reilly said the terms of Coakley’s agreement “impose significant restrictions on Partners which are clear, meaningful, and enforceable.”

Regulators have to consider the likelihood of success in deciding whether to sue or settle, said a Yale economics professor, Fiona Scott Morton, a former deputy assistant attorney general in the Justice Department’s antitrust division.

“There’s always uncertainty,” said Morton, who signed the petition. But imposing the kind of conduct restrictions included in the Partners settlement creates an enforcement challenge, she said.

Related:

Four ways the Partners deal affects the governor’s race

Rivals warn Partners’ growth will raise costs

3-hospital takeover by Partners OK’d

Coakley reaches deal with Partners on costs

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