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Partners, Coakley file agreement on expansion

South Shore Hospital in South Weymouth.

South Shore Hospital

South Shore Hospital in South Weymouth.

Partners HealthCare System has agreed to pay $3.3 million to cover the cost of the state’s five-year investigation into its market power, and for a court-appointed monitor to scrutinize its actions for the next decade.

The payments are detailed in a much-anticipated final agreement between the health care giant and Attorney General Martha Coakley that was filed in Suffolk Superior Court on Tuesday. The consent judgment follows the outlines of a preliminary agreement reached by the two sides in May, allowing Partners to acquire South Shore Hospital in Weymouth and at least two other community hospitals, but restricting its further expansion and temporarily capping its prices.

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Coakley said she determined that a settlement of the antitrust inquiry would have more impact than suing Partners to try to block its mergers with South Shore and Hallmark Health System’s Lawrence Memorial and Melrose-Wakefield hospitals. A suit would have maintained an unacceptable status quo in the health care market, with Partners using its dominant position to charge higher prices, she said.

Through the settlement, she said in an interview, “We changed their contracting practices, we’ve got restrictions on their prices and total medical expenses, and we’re going to continue to monitor them.”

Coakley said that in most cases, the attorney general seeks a judge’s approval for such agreements immediately. Instead, Coakley requested a court hearing by early next week, so that opponents have time to file their opinions with the court. “We do know there’s been an enormous amount of interest in this,” she said.

That step, however, did not satisfy executives at rival hospitals, who had requested public review of the settlement before it was filed in court. They have strongly criticized the agreement, saying it will allow Partners to add at least three hospitals and 600 doctors to a health care network that is already the largest by far in Eastern Massachusetts.

“I’m befuddled. I’m confused,” said Howard Grant, who heads Lahey Health System in Burlington. “I can’t understand why the attorney general decided to push the settlement through the court without the kind of public process so many of us have called for.

“Based on what we know about it, the settlement is diametrically opposed to all the attorney general’s efforts over the years to be a proponent of transparency and control health care costs,” he said in an interview.

Dr. Paul Hattis, a member of the state’s Health Policy Commission, which said the Partners-South Shore merger would raise costs, called the court filing premature and said a public discussion about the terms should have been allowed first. “Now we must all look to the presiding judge in this case for any sort of discussion process around the proposed settlement agreement,’’ he said in an e-mail Tuesday.

The agreement between Partners and Coakley’s office is the result of an extensive investigation into Partners’ market conduct and proposed acquisitions that began in 2009 and also involved the US Department of Justice.

The federal government did not immediately return calls yesterday asking about the status of its investigation into possible anticompetitive activity by Partners.

The parties reached a preliminary agreement in May, and Coakley's office indicated Tuesday that the terms remain largely the same. It allows insurers to split Partners into four separate contracting groups — academic medical centers, community hospitals, South Shore Hospital, and Hallmark Health — for up to 10 years, in an effort to reduce Partners’ market clout, which it has used to require insurers to contract with all of its affiliates, according to the attorney general’s staff.

The settlement limits Partners’ price increases to general inflation; prohibits it from acquiring any more hospitals in Eastern Massachusetts for seven years without approval from Coakley’s office; and limits growth of Partners’ community physicians network.

The Health Policy Commission, which is charged with trying to limit the growth of health care spending, is not expected to complete its review of the proposed Hallmark transaction until next month.

The agreement filed in court includes a provision requiring that Partners and Coakley’s office “confer to seek to mitigate any material price impacts predicted’’ by the commission.

Partners spokesman Rich Copp said the agreement allowing South Shore and Hallmark to join the company’s network “supports our vision to provide more coordinated patient care, delivered closer to our patients’ homes in lower cost settings.’’

Deputy Attorney General Chris Barry-Smith, who led the office’s investigation into Partners and the settlement negotiations, defended the pact in a letter sent Tuesday to lawyers for competing hospitals and doctors groups that had publicly criticized it.

“Put simply, this office resolved its claims against Partners only because we believe the consent judgment will prove more effective than litigation at addressing the ‘Partners problem’ and promoting a well-functioning, and ultimately lower cost, health care market,” Barry-Smith wrote to lawyers from Beth Israel Deaconess Medical Center, Atrius Health, Lahey Health, and Tufts Medical Center.

Liz Kowalczyk can be reached at kowalczyk@globe.com. Robert Weisman can be reached at weisman@globe.com.
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