Partners ends bid to acquire South Shore Hospital

Unit was central to contentious plan to expand; two others remain in play

South Shore Hospital.Zack Wittman for the Globe/File

The state’s most powerful health care system on Tuesday abandoned its three-year effort to acquire South Shore Hospital, the centerpiece in Partners HealthCare’s controversial expansion drive, which had riveted and divided the Massachusetts medical community.

Regulators are still reviewing another front in Partners’ troubled expansion plans, an effort to acquire two hospitals north of Boston and a physicians group on the South Shore. The health care system said it has put on hold the plan to acquire those hospitals.

The decision to retreat on South Shore Hospital, disclosed in a court document, came after a state judge in January rejected a deal Partners struck with the state’s previous attorney general, Martha Coakley, to allow the acquisition to go forward. Coakley’s successor, Maura Healey, had threatened to sue to kill the deal.

“We have listened and heard the public concerns,” Partners chief executive Gary L. Gottlieb wrote in a letter to colleagues Tuesday, adding that Partners has “decided that the best approach is not to proceed with our plan” to acquire the Weymouth-based health system.

Partners’ withdrawal leaves South Shore Hospital, which has 378 beds, in limbo. Its president, Richard Aubut, who had said he’d retire in early 2015, released a statement Tuesday maintaining “it is now time to move forward.”

The statement did not indicate whether South Shore Hospital, the largest independent community hospital in Eastern Massachusetts, would be open to a merger with another system. A spokeswoman said Aubut would not discuss the hospital’s plans Tuesday.

Partners is pursuing a separate deal to take over Hallmark Health System, which has a 234-bed hospital in Melrose and a 134-bed hospital in Medford. As with the South Shore deal, Partners had argued that a having a bigger network would allow it to deliver better care more efficiently. Partners operates Massachusetts General, Brigham and Women’s, and eight other hospitals.

But on Tuesday, Gottlieb said Partners and leaders of Hallmark have agreed “to take a pause as we reflect on our next steps.” The doctors group at Hallmark already belongs to the Partners Community Physicians Organization.

Spokesman Rob Brogna said Hallmark “remains committed to working with Partners HealthCare and the Commonwealth of Massachusetts to manage the growing costs of health care.”

Formal notice of Partners’ decision to withdraw its South Shore Hospital bid came in a document filed jointly in Suffolk Superior Court Tuesday by the attorney general’s office, Partners, South Shore Hospital, and Hallmark.

It said Healey’s office will further evaluate the proposed takeover of Hallmark pending a separate antitrust review by federal regulators.

Healey hailed Partners’ decision as “a good result for the Commonwealth and people in Massachusetts. But there’s more work to be done in ensuring affordable health care and access to quality care.”

She suggested she is reconsidering her opposition to the acquisition of Hallmark and of Harbor Medical, a group practice of about 70 doctors on the South Shore.

“We’re dealing with an entirely new context here now that Partners isn’t going to go forward with South Shore Hospital,” Healey said. “Everything will have to be considered in that light.”

The proposal to acquire South Shore Hospital drew opposition from rival hospitals and community organizations that argued Partners would wield too much influence in the marketplace and would drive up costs.

Opponents expressed concern that the health care giant — and Healey — had not explicitly closed the door on Partners’ other efforts to expand within Massachusetts.

“This is the first of a set of necessary steps for Partners to show that it’s truly interested in affordable health care in the Eastern Massachusetts marketplace,” said Paul Hattis, a member of the Health Policy Commission, which had warned last year that the proposed hospital acquisitions would increase health spending.

“I’ve called on Partners to pull all these deals off the table until they have a track record of showing success in responsible contracting and efficiencies in their care delivery,” he added.

Gottlieb, through his chief of staff, Peter Brown, declined to discuss the Partners decision. Gottlieb is planning to leave Partners next month, turning over the reins to David F. Torchiana, president of the Massachusetts General Physicians Organization. Torchiana has taken a conciliatory tone toward state regulators and competing hospitals and suggested that Partners would focus any future expansions out of state and internationally.

But Brown, the Partners executive, said, “we’re going to keep the conversation going with the leadership of Hallmark.” He also said Partners remains committed to acquiring Harbor Medical. “We have a longstanding relationship with Harbor Medical, and we still want to partner with Harbor. That’s part of our commitment to bring coordinated care to the communities we serve.”

As for South Shore Hospital, it was unclear if it would be willing or able to strike partnerships with other hospital systems, most of whom had opposed its deal with Partners. South Shore continues to maintain clinical ties in cancer and other medical specialties with Partners-owned Brigham and Women’s. “We’re an independent hospital,” said South Shore Hospital spokeswoman Darcy. “We can’t speculate about the future.”

The settlement with Coakley would have let Partners take over South Shore and Hallmark, but would exact temporary limits on prices and other restrictions.

Healey, however, warned the deal would boost health care costs. The pact ultimately was rejected last month by Suffolk Superior Court Judge Janet L. Sanders, who said it had too few protections to keep Partners from dominating health care in Massachusetts.

Gottlieb, however, did not back down. “Our goal was to build with [South Shore] a long-lasting health care partnership that would have benefitted the people of the South Shore for generations to come,” Gottlieb wrote Tuesday.