Hallmark Health System announced it broke off exclusive talks to be acquired by Partners HealthCare after public outcry and legal and regulatory scrutiny left the deal in limbo.
Hallmark, headquartered in Medford, Mass., and includes two hospitals, will look more broadly for a new partner, Alan Macdonald, president and CEO of Hallmark, said in a memo to employees.
Hallmark declined an interview request.
“We know amid a changing regulatory landscape we must take a new look at the best ways to achieve our goals,” he said. “We are fortunate to work in proximity of the most reputable providers of healthcare in the country. There are many opportunities for us to explore.”
For Boston-based Partners, the breakup is the latest blow to expansion plans that provoked criticism from competing systems and intense scrutiny from regulators.
“After careful consideration, the leaders of Hallmark and Partners have concluded that now is not the optimal time to pursue a merger,” Partners spokesman Rich Copp said.
Partners entered deals to acquire South Shore Hospital in 2012 and Hallmark in 2013, with initial approval in 2014 from the Massachusetts attorney general. But that endorsement was soon overwhelmed by opposition from regulators and the courts.
The Massachusetts Health Policy Commission said in a review of the deal (PDF) that it would increase private insurers' costs by $15.5 million to $23 million a year “due to material price effects,” that would erase any benefit from greater efficiency.
Partners, already higher priced than Hallmark hospitals, would gain market clout with the deal, the commission said. “This transaction will reinforce Partners' position as the provider with the highest share of inpatient and primary-care services in its northeastern Massachusetts service areas.”
The 2014 elections gave Massachusetts a new attorney general who rejected her predecessor's approval of Partners' expansion. In January, a court did the same.
Partners said in February it would drop plans to acquire South Shore.
Hallmark hired the financial advisers Kaufman Hall to search for a new partner, Macdonald said.