State health policy board unanimously approves report critical of Partners plan to take over South Shore Hospital

The state Health Policy Commission on Wednesday unanimously approved a report warning that Partners HealthCare System’s planned takeover of South Shore Hospital would drive up costs and hurt competition, leaving a decision on whether the deal can go through up to state and federal antitrust regulators.

“We found that market concentration in the South Shore region would rise sharply,” Karen Tseng, the commission’s director of policy for market performance, told commission members.

At stake is whether Boston-based Partners, already the state’s largest hospital and physicians organization, will be allowed to grow even more. Partners’ plan to acquire the 378-bed South Shore Hospital in Weymouth—as well as a separate agreement to take over the Hallmark Health hospitals in Medford and Melrose—would cement its dominance.

Advertisement - Continue Reading Below

Investigators from the state attorney general’s office and the US Department of Justice have spent more than four years looking into alleged anticompetitive practices by Partners, which operates the Harvard-affiliated Massachusetts General and Brigham and Women’s hospitals. While their inquiry is largely finished they have been awaiting the final report from the Health Policy Commission, a watchdog agency created by the Legislature in 2012 to rein in medical costs.

Peter Brown, chief of staff to Partners chief executive Gary L. Gottlieb, said his organization couldn’t comment until its executives had time to read the report.

A preliminary commission report, issued Dec. 18, said the plan to bring South Shore Hospital and its affiliated Harbor Medical Associates into the Partners system would boost annual spending by the state’s three largest health insurers by a projected $23 million to $26 million, overwhelming potential savings of a merger.

Last month, Partners released a forceful rebuttal. It said the merger with the Weymouth hospital and the South Shore physicians group would result in better coordinated care, saving about $27 million a year. Partners said the commission’s analysis of the market impact employed “flawed reasoning” and contained “inexplicable omissions.”

But the conclusions of Wednesday’s final report—approved by a 9-0 margin—largely mirrored those in the preliminary report, which said the acquisitions would “increase health care spending, likely reduce market competition, and result in increased premiums for employers and consumers.”

Under the state law that created the health commission, it lacks the authority to block a merger, so Partners and South Shore Hospital can technically close on their deal within 30 days. But talks between Partners executives and state and federal regulators could delay that timetable or result in a settlement in which the health care system agrees to conditions that blunt the deal’s impact on cost and competititon.

Alternatively, regulators could seek to halt the acquisition by bringing suit on antitrust grounds. That could result in a legal battle dragging on for months or years.