The state’s new watchdog agency for health costs said Friday that it will investigate the impact on the North Shore of Partners HealthCare System’s plan to acquire Hallmark Health System, which operates Melrose-Wakefield Hospital and Lawrence Memorial Hospital in Medford.
Partners and Hallmark were notified that the state Health Policy Commission, created under the 2012 cost containment law, was launching a review of the proposed transaction. It will be the fourth such review initiated by the commission, including those examining two other pending Partners acquisitions and the merger of Winchester Hospital into Lahey Health.
The North Shore deal would boost to 10 the number of acute care hospitals run by Partners, the parent of Massachusetts General and Brigham and Women’s hospitals.
In a statement Friday, commission executive director David Seltz said the increased “market concentration” resulting from the Hallmark deal “raises competitive concerns around increased negotiating clout (with health insurers) and potential price increases.”
Partners in October outlined a strategy for expanding medical services on the North Shore, including the takeover of the two community hospitals. Under the plan, which requires state and federal approval, it would convert Lawrence Memorial from an acute care hospital with 134 beds to a short-stay hospital with 20 to 40 beds, and renovate the 234-bed Melrose-Wakefield.
The regional strategy also called for changes at the North Shore Medical Center in Salem, already owned by Boston-based Partners. The medical center’s Union Hospital in Lynn would become a primary care and behavioral health facility while 72 of its 83 medical surgical beds would be transferred to the medical center’s larger 273-bed Salem Hospital.
Partners vice president Rich Copp called the plan a “thoughtful approach to health care that will ultimately lower costs” by improving care coordination on the North Shore.
“We look forward to working with the Health Policy Commission to demonstrate that this partnership will offer patients north of Boston better, more coordinated, and cost effective health care,” Copp said. “The plan offers more primary care for the region. It invests in psychiatry and behavioral health at a time when the state is losing much-need capacity.”
While the cost and market impact review is being started by the commission’s staff, commissioners will be asked at a meeting next Wednesday to vote to continue the inquiry.
The staff will also present a preliminary report to the commission detailing the impact of Partners’s proposed takeover of the 378-bed South Shore Hospital in Weymouth and the planned acquisition by the Partners-owned Brigham and Women’s Physicians Organization’s of Harbor Medical Associates, a Weymouth doctors group.