Attorney General Martha Coakley made an important political decision this week: She will not go to war with the state’s largest health care company and its largest private employer while running for governor.
Rather than filing a lawsuit to stop Partners HealthCare System from taking over South Shore Hospital, she opted to allow the merger while imposing a range of price controls and limits on the firm’s vaunted bargaining power.
The agreement announced Monday allowed Coakley, a leading candidate for the Democratic nomination, to contend that she is taking strong action to control rising health care costs, while also granting the merger long sought by Partners, a politically potent Goliath, to use Coakley’s term, which employs 60,000 people and runs some of the state’s most iconic institutions, such as Massachusetts General Hospital and Brigham and Women’s Hospital.
The acquisition is popular on the vote-rich South Shore and suing to stop it could have provoked a backlash from business leaders and voters there, according to health care analysts.
“It’s a deal that gives her the best of both worlds, as much as that’s possible to attain,” said John McDonough, a professor at the Harvard School of Public Health.
The settlement resolves a three-year investigation into allegations of anticompetitive behavior by Partners. The deal found support from an unlikely ally, Republican gubernatorial candidate Charlie Baker, while coming under attack from candidates and critics on the left who contended it did not go far enough to rein in Partners’ market clout, which has been blamed for driving up health costs.
Alan Sager, a professor at the Boston University School of Public Health, said that instead of just blocking the merger, Coakley could have sued to break up Partners. The company, however, has effectively “cloaked [itself] in holy robes,” he said, and convinced policy makers that any attempt to interfere with its expansion or revenue could harm patients.
“There’s no political gumption anywhere in the state to take concrete actions that would slow cost increases,” Sager said.
Under the settlement, which must be finalized by June 16 and approved by a court, Partners will take over South Shore Hospital in Weymouth while agreeing to caps on its prices and growth for the next 5 to 10 years.
Partners’ prices will be tied to the inflation rate, currently about 1 to 1.5 percent, until 2020. Its bargaining power will be limited for the next 7 to 10 years. And the company will not be allowed to acquire any new hospitals in Eastern Massachusetts for the next 7 years.
Coakley said the restraints will help control Partners’ high prices, which have burdened families, businesses, and taxpayers.
“Ultimately, we believe this agreement will do more to reduce costs, help adjust a dysfunctional marketplace, and level the playing field for providers and insurers, than any successful lawsuit would have had,” she said.
McDonough said the deal puts in place the first price controls since the state deregulated hospital rates in 1991. “I would say this is unprecedented in the modern era, so she can take credit for that,” he said. He also said critics are correct in pointing out that merely capping Partners’ price increases is far different from reducing the company’s high prices.
That criticism was voiced by Don Berwick, a Democratic candidate for governor and former federal health care official, who called the deal troubling.
“It essentially makes permanent Partners’ already unacceptably high costs without requiring the reduction in prices that is needed, tying the state to a fundamentally flawed pricing structure for the future,” said Berwick, who supports a single-payer health care system. “The reforms the state needs are much more fundamental.”
Evan Falchuk, an independent candidate, also blasted the agreement.
“Monopolistic deals like this are a huge part of what makes health care so expensive in Massachusetts, and it’s time for them to stop,” he said in a statement. “Partners has already amassed enormous market power, which has translated into spiraling health care premiums for everyone. This deal does nothing to change that, and in fact allows Partners to close on a massive acquisition that will further strengthen its market dominance.”
Coakley found stronger support from some rivals who are often quick to pounce on her every move.
Baker, a former chief executive of Harvard Pilgrim Health Care, called the agreement a good start and added that, to truly lower costs, “Massachusetts must insist on full price transparency from all providers for all services from all payers.”
Steve Grossman, a Democratic candidate, said South Shore voters he has spoken to support the merger.
“This deal apparently represents a common-sense solution that will continue to deliver quality care to residents of the South Shore as well as control health care costs for consumers and employers,” he said.
Jeffrey McCormick, an independent candidate, said “we’re moving in the right direction’’ but added he was concerned the caps on Partners’ growth and prices expire over the next 10 years. “What happens when the caps are lifted?” he said.
Joseph Avellone, a Democratic candidate, was also pleased.
“This agreement is important,” he said, “because it assures that the acquisition of South Shore Hospital by Partners will not cause prices to rise for citizens on the South Shore for services in that local hospital just because they are now part of a larger system.”Michael Levenson can be reached at email@example.com. Follow him on Twitter @mlevenson.