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Partners merger would raise health costs, panel says

Attorney General Martha Coakley is renegotiating a controversial settlement with Partners HealthCare after a state commission said Wednesday that a proposed takeover of two North Shore hospitals would raise costs and increase Partners’ already formidable market power.

Coakley’s deal would allow Partners to acquire South Shore Hospital in Weymouth and Hallmark Health System in Medford and Melrose, while setting price caps and other limits on Partners’ further expansion for several years. Coakley had structured the deal, announced in May, so that it could be revised based on findings of the Health Policy Commission, a watchdog agency.

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The renegotiation began immediately after the commission endorsed findings that Boston-based Partners’ acquisition of Hallmark would raise costs up to $23 million a year and stifle competition, according to the attorney general’s office.

“Our office specifically retained the ability to reengage with Partners. Those negotiations begin today,” Brad Puffer, Coakley’s spokesman, said in a statement. He did not specify the changes Coakley would seek.

Coakley, a Democratic candidate for governor, has been criticized by political rivals, Partners’ competitors, and antitrust specialists for working out a deal with Massachusetts’ biggest health system instead of suing to block its bid to grow. Puffer maintained the settlement “will fundamentally alter Partners’ negotiating power and save costs across the entire network, accomplishing more than a lawsuit would have done.”

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The settlement needs approval from a Superior Court judge. The next hearing is Sept. 29.

The commission studied Partners’ proposed acquisition of South Shore Hospital and Hallmark and said both deals would raise costs. In a final report on the Hallmark acquisition Wednesday, the commission said Partners failed to provide enough information to show the deal would improve care or lower expenses.

“This commission cannot function solely on hope,” Commissioner Wendy Everett said. “We do not believe this acquisition is really going to benefit the Commonwealth, and may even be to its detriment.”

Partners and Hallmark dispute the findings. They say their merger will lower medical costs by $21 million a year for five years, by delivering care more efficiently across various North Shore facilities.

“This transaction is a unique opportunity for us to work with Hallmark Health in order to improve patient care for Massachusetts residents living north of Boston,” Partners spokesman Rich Copp said in a statement.

The commission doesn’t have the power to block mergers, but it can refer them to the attorney general for further investigation. The panel has submitted its reports as part of the public comments the judge will review.

Commission chairman Stuart Altman said he hopes a final settlement will “eliminate or substantially reduce the likelihood that price increases will occur.”

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey
@globe.com
. Follow her on Twitter @priyanka_dayal.
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