Judge Rejects Partners Deal To Acquire 3 Hospitals

Updated 6:30 a.m.

BOSTON — The state health care market is reverberating with the aftershocks of a major court decision Thursday which rejected a deal that would have let Partners HealthCare, the state’s largest hospital network, acquire at least three more hospitals.

Suffolk Superior Court Judge Janet Sanders gave two reasons for rejecting the deal former Attorney General Martha Coakley’s top staff spent months thrashing out with Partners. First, she says, it is not in the public interest.

Allowing the network to expand “would cement Partners’ already strong position in the health care market and give it the ability, because of this market muscle, to exact higher prices,” Sanders said.

For proof, she cited the work of the state’s Health Policy Commission. It concluded, in separate studies, that adding both South Shore Hospital and two Hallmark Health hospitals to the Partners system would increase health care spending by $39 million to $49 million a year in Massachusetts.

“If we’re going to have the cost of health care grow at a more normal rate, we need to have enough competition in the marketplace so that no part of the system can dictate prices,” said Stuart Altman, chair of the Health Policy Commission. “If you get too big, as Partners has become, it sort of destroys the concept of a competitive marketplace.”

Sanders’ second reason for blocking the deal: it would just be too difficult to enforce. Her opinion offered a few examples.

What happens, Sanders asked, if Partners seeks to exceed the total medical expense (TME) growth cap in the agreement because of “unanticipated market conditions that affect utilization”? The agreement does not define that phrase, Sanders said, or offer any criteria for deciding if the market has changed enough to justify a possible TME increase request.

The agreement “envisions a ten-year period during which this court could be called upon to resolve disagreements among the parties in at least 10 different areas,” Sanders said.

“The court was very concerned about [resolving disputes],” said Matthew Cantor, an attorney specializing in health care anti-trust cases, “particularly when you consider how dynamic and evolving the health care business is.”

“God Bless Judge Sanders. She has stood up for competition in the Greater Boston health care market; and we applaud her for it,” the Rev. Burns Stanfield, president of the Greater Boston Interfaith Organization, said in a statement. His group submitted a comment to the court in opposition of the deal. “And God Bless the Health Policy Commission, because unlike anywhere else in the United States, we have a regulatory body that is meant to keep things fair.”

It is unusual for a judge to reject any agreement an attorney general presents. Sanders acknowledges that she “owes deference” to Coakley and “does not question her good faith.” But Coakley’s proposed remedies would be “like putting a band-aid on a gaping wound that will only continue to bleed (perhaps even more profusely) once the band-aid is taken off,” Sanders said. Those are tough charges to lodge against the state’s largest group of healers.

In many ways, this was no ordinary anti-trust settlement process.

Hospitals that compete with each other came together to fight the Partners deal. They and other opponents persuaded Judge Sanders to allow public comments and 174 poured in, most in opposition to the agreement. There was that dramatic moment in court when former Attorney General Martha Coakley rose unexpectedly from the audience to defend herself. 

And then on Monday, the new attorney general, Maura Healey, submitted a brief to Judge Sanders. Healey told Sanders and WBUR that she didn’t like the deal and would try to stop Partners from acquiring South Shore Hospital.

“I would be prepared to sue to stop the transaction from going forward if need be,” Healey said Monday. She repeated that threat Thursday.

Healey has not said whether she would try to stop Partners from acquiring Lawrence Memorial and Melrose Wakefield, the two hospitals owned by Hallmark Health. In a statement, Hallmark said it was disappointed by Judge Sanders’ decision and said it would “look forward to working with Attorney General Healey to further explain and achieve our vision.”

Partners says it is reviewing its options. CEO Gary Gottlieb told employees the judge blocked a deal that “would have paved a pathway to delivering high-quality care closer to home for patients and their families in a lower cost community-based setting.”

South Shore Hospital spokeswoman Sarah Darcy echoed the commitment to that vision in a statement and added, “it is disappointing that the voices of the people of our broad region, who have spoken out by the thousands in support of this vision, described in the proposed merger, have been lost in the process because of the politics.”

Lots of people are talking about the politics of supporting and opposing Partners.

“I think it took a lot of courage for both the judge and the attorney general to rule against the consent agreement,” said Nancy Kane, a professor at the Harvard School of Public Health who has studied health care and hospital financing in Massachusetts for more than 40 years. “Any elected official has to be very cautious in taking on a system as wealthy and connected as Partners.”

The question going forward, Kane says, is “can we fix the market power problem? Partners was already too big before the deal to acquire these three hospitals took shape.”

“We need to work on re-balancing disparities so we can achieve our mutual goals as a community — to provide quality health care for all, in a cost effective way,” said Ellen Lutch Bender, a hospital consultant who runs Bender Strategies, LLC. “I don’t remember a time that presented such a chance.”

Many in Massachusetts who follow health care with the same passion they devote to sports are wondering: What’s next? Does Partners, with a new, soon-to-be named CEO press ahead with expansion plans or halt them? Will state or federal investigators keep pushing against Partners’ market power? And will the new governor or Legislature campaign for more or less control over health care prices? This isn’t the Super Bowl or “DeflateGate,” but we’ve got game in health care.

Related:

Please follow our community rules when engaging in comment discussion on this site.