Balfour and the Orioles had reportedly agreed on a two-year, $15 million contract and expected to make it official at a news conference Friday.
"I guess the good news is we have other options to look at as we continue to try to improve our ballclub. But this is a situation where the deal's not going to come together," Duquette said. "We would never say never or close the door, but we're going to turn our attention elsewhere for now, to look at some other options to try to staff our team and continue to build a contending team for 2014."
Duquette said he couldn't elaborate much on what the deal-breaker was, but The Baltimore Sun cited multiple sources saying the issue was Balfour's surgically repaired right shoulder.
But Balfour and his representatives insist the closer is healthy. Balfour told The San Francisco Chronicle that he's "100 percent fine."
Balfour's agent, Seth Levinson, released a statement Friday evening that said Balfour is "completely healthy" and has been reviewed by two well-respected team physicians: Dr. Koco Eaton of the Rays and Dr. Tim Kremchek of the Reds. Levinson said Kremchek "reviewed the Orioles' medical report and advised that he is remarkably impressed that there has been little change in Grant's arm for almost 10 years.
"Now factor into the equation that Grant was a 2013 All Star, pitched 65 games and another 3 scoreless innings in the post season with a 94-95 mph fastball. The only reasonable conclusion is that Grant is healthy and the Orioles at the last moment changed their minds," Levinson's statement continued. "Grant is an ALL STAR CLOSER who has converted 55 of his last 58 Save Opportunities. Talent wins at the end of the day and if a Club wants to win then they need Grant coming out of the pen in the 9th inning."
Duquette repeated several times that players are subject to a "very, very thorough screening" before they're officially acquired, but also noted that the process is different with each club and each doctor. Baltimore's front office went through its usual preliminary medical review before striking an agreement with Balfour.
Though he didn't completely rule out the possibility of Balfour joining the Orioles on a lesser deal, like the Red Sox did with first baseman Mike Napoli last offseason, Duquette made it pretty clear they're going to evaluate their other options first.
"The Orioles are moving on from this situation," Duquette said. "There was no contract. There was an understanding pending a physical exam."
For the Orioles, moving on means wading back into the closer market. Duquette said the club will consider both trades and free-agent signings, and the latter presents two potential candidates in former Rays closer Fernando Rodney and former Indians closer Chris Perez. The Sun cited a source that said the Orioles will focus first on Rodney, who saved 85 games and posted a 1.91 ERA over the past two years with Tampa Bay.
But Duquette said he wouldn't limit his search to only pitchers who have closed in the past. It's even possible that they could promote an internal candidate to fill the role.
"There's still a few pitchers on the board that could help us and there's a few pitchers that could certainly help our bullpen," he said. "If we get reliable pitchers in our bullpen, I'm sure somebody can close out the game. Two years ago, we were looking for a closer and we found it from the people we had. Who knows, we may do the same thing again this year in 2014."
Duquette reiterated that he'd like to acquire another hitter to bolster the lineup. But he said adding depth to the O's pitching staff is the main priority, and their goal is still to introduce a new starting pitcher and another reliever before the season begins.
"We'd love to do that. That's been on our shopping list since the start of the offseason," Duquette said. "We'd love to be able to check those boxes off."