State panel finds proposed Partners’ merger will raise costs

The state Health Policy Commission on Wednesday formally endorsed findings that Partners HealthCare’s proposed acquisition of two hospitals north of Boston will raise costs and expand the already formidable market power of Massachusetts’ biggest health system.

The panel voted to send the proposed merger to Attorney General Martha Coakley’s office for further review, even though Coakley has struck a deal with Partners that would allow the company to acquire Hallmark Health System in Medford and Melrose, along with South Shore Hospital in Weymouth. That settlement is still awaiting court approval.

The Health Policy Commission, charged with developing policies to control health care costs and improve care, has no power to block mergers. It can only review, recommend, and call attention to the potential impact of consolidation in the health care industry.

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The commission’s analysis found the merger would raise medical costs by as much as $23 million a year, without necessarily improving the quality of care. The commission said Partners and Hallmark have failed to provide “an unequivocal commitment not to increase the prices of Hallmark providers and to lower total medical spending across all books of business.”

Partners and Hallmark dispute the commission’s findings. They say the deal will lower medical costs by $21 million a year for five years, by better organizing care and delivering it more efficiently across various North Shore facilities.

In July, commissioners approved a preliminary report that found that the Partners-Hallmark deal would increase costs. Partners refuted those findings a month later in a formal response. But the board was unswayed.

Partners and the Health Policy Commission had a similarly fraught dialogue on the health system’s proposed acquisition of South Shore Hospital earlier this year.

Coakley’s deal with Partners would allow the system to add Hallmark and South Shore to its network while setting price caps and other limits. But the deal has drawn criticism from political rivals of Coakley, who is running for governor, as well as several of Partners’ competitors, who believe it will further concentrates market power in Partners hands. Economists, anti-trust specialists, and community groups have also raised concerns.