Lebanon — Officials at Dartmouth-Hitchcock and Elliot Health System said on Friday they had ended formal affiliation talks, a setback for the state’s only academic medical center as it seeks to establish a hub among the bigger cities of southern New Hampshire.

“After due consideration and deliberation, both organizations have determined that we can best serve our respective missions by continuing to work collaboratively in selected areas rather than by entering into a more fully integrated relationship,” D-H CEO and President James Weinstein said in an email to employees at the Lebanon-based health system.

Officials at Elliot — which runs Manchester-based Elliot Hospital, a busy trauma center in the state’s largest city, as well as various clinics and health centers from Londonderry to Hooksett — also said talks had ended collegially.

“Despite the sustained hard work and good faith of both boards and senior management, we have together agreed to shift our focus from pursuing a jointly integrated system to seeking the best means to continue to build on our work together in alternative ways,” Elliot said in a statement.

The formal affiliation talks, which began last May, aimed to bring Elliot into the D-H fold, much like Alice Peck Day Memorial Hospital in Lebanon, New London Hospital, Mt. Ascutney Hospital in Windsor, and Cheshire Medical Center in Keene, N.H., now are part of the Dartmouth-Hitchcock system.

With 396 licensed beds, Dartmouth-Hitchcock Medical Center is the largest hospital in New Hampshire, followed by Catholic Medical Center in Manchester with 330, Elliot with 296 and Concord Hospital with 295. (Elliot officials said they currently staff 230 beds, but have the flexibility for 250).

Elliot operates independently, and the talks also came as Boston-based Partners Healthcare has made inroads in southern New Hampshire as academic medical centers try to expand their patient population bases. Partners, which includes Massachusetts General Hospital, announced plans last May to purchase Dover, N.H.-based Wentworth-Douglass Hospital.

But the Dartmouth-Hitchcock health system also found itself having to do some belt-tightening last year, posting a $39 million operating loss in fiscal 2016 and subsequently laying off 84 employees.

A filing last week indicated D-H is on course to recover and break even, or better, in 2017.

Officials at Elliot, which started as a 25-bed hospital in 1890, also have been contemplating more than $300 million in capital improvements, including upgrades to its emergency room and its cancer center.

D-H physicians and Elliot collaborate on such services as same-day surgery and gastroenterology, and Dartmouth-Hitchcock operates large clinics in such places as Concord, Manchester and Nashua.

“We worked hard together to find those areas of overlap and, ultimately, we just decided we can better serve our patients in southern New Hampshire not just with one partner, but with multiple partners,” John Kacavas, Dartmouth-Hitchcock’s chief legal officer and general counsel, said of the discontinued Elliot affiliation talks.

Asked if the combination of the D-H belt-tightening and Elliot capital needs were a factor, Kacavas said “that consideration was not dispositive, (not) the reason we agreed not to pursue a more integrated relationship, but of course it was a consideration both for our management and our board.”

Kacavas also said D-H will continue to explore options in southern New Hampshire, in part because the large population base there “really is conducive to our population health strategy,” in which D-H seeks to move away from a fee-for-service payment system and toward a system where providers are paid a set amount per patient to maintain their health.

“There is no question that Dartmouth-Hitchcock is going to seek a more robust presence in the southern New Hampshire region,” Kacavas said, “working in tandem with a number of partners, and Elliot will be one of those partners.”

Dr. Greg Baxter, Elliot’s chief medical officer, said the Manchester hospital and D-H physicians in southern New Hampshire had long-standing relationships and that an affiliation would have been “a natural extension to build on those clinical synergies and physician-to-physician relationships.”

He said an affiliation was “more out of a desire than a need,” and that Elliot would continue to work with various allies.

Elliot Senior Vice President and General Counsel John Friberg said the focus of the talks had been about “building an integrated delivery system,” but it also was highly complex.

“There were just so many moving parts that in the end we could not resolve a few of them in a way that was mutually acceptable and met the needs of both organizations,” he said.

The end of talks was a second setback for D-H in the past decade as it has sought to expand in southern New Hampshire. Some seven years ago, D-H dropped a bid to affiliate with Manchester-based Catholic Medical Center after the New Hampshire Attorney General’s Office opposed the deal.

John Gregg can be reached at jgregg@vnews.com or 603-727-3217.

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