Attorney General Martha Coakley reached an agreement Monday with Partners HealthCare that will allow the state's largest hospital and physicians' network to acquire South Shore Hospital and Hallmark Health Systems.
Coakley said the deal will also alter the negotiating power of Partners for the next decade and help control health care costs in Massachusetts. The agreement follows an antitrust investigation.
Partners President and CEO Gary Gottlieb said the agreement will let the network continue its core health care mission.
[sidebar title="More From WBUR's CommonHealth:" width="335" align="right"]
The deal bars Partners from raising costs across its network more than the general rate of inflation through 2020. The rate of inflation has averaged 1 to 2 percent over the past several years, well below the rates traditionally negotiated by Partners over the past decade.
This price restriction covers all of Partners providers, including hospitals, outpatient facilities, physicians and health care professionals. Any year that Partners doesn't comply with the cost freeze, it will have to refund the amounts charged or received.
Coakley said the agreement, which must still be finalized and approved by a court, "fundamentally reduces the negotiating power of Partners for the next 10 years to better control health costs for families and businesses, and help level the playing field in the market."
The deal seeks to slow the growth of Partners by capping its physician growth for five years, preventing it from negotiating commercial insurance contracts for physicians not employed by Partners for 10 years, and blocking hospital expansion in eastern Massachusetts and Worcester County for seven years, exempting Emerson Hospital, a Partners affiliate.
Gottlieb said the agreement will let Partners "carry forward with our plans to offer the highest quality care, whenever possible, closer to the homes of our patients and their families in a lower cost community-based setting."
He said that Partners has already cut $300 million in costs out of its system, but that it will have to operate within "a tighter budget envelope."
"Society and the marketplace are calling on us to do so. This means that there will be trade-offs and decisions to make and we will need to manage them, carefully and thoughtfully," Gottlieb said in a letter Monday.
In February, the state Health Policy Commission, said that Partners' acquisition of South Shore Hospital would increase health care spending, likely reduce competition, and result in increased premiums for employers and consumers.
The commission referred its report to Coakley's office.
Commission Chairman Stuart Altman said Monday that he was pleased with the settlement and that he looked forward to reviewing the final agreement.
Monday's agreement must be completed by the parties by June 16 and approved by a court before taking effect.
Coakley said the agreement is the result of an antitrust investigation by her office and the Department of Justice into Partners and into the organization's intention to purchase South Shore and Hallmark hospitals. Hallmark runs Lawrence Memorial Hospital and Melrose-Wakefield Hospital.