1. Sign him anyway. The original deal was for two years and $14 million.
2. Try to sign him for less money, as the Red Sox did a year ago with Mike Napoli when his original three-year deal became an incentive-laden one-year deal after his physical revealed a hip condition. But you also risk losing Balfour to another team.
3. Let Balfour go and sign another closer -- Fernando Rodney being the other one still out there.
4. Use one of the pitchers already on the roster as closer and spend that $14 million elsewhere.
Balfour hasn't missed any time in recent seasons, although he did miss all of 2005 and 2006 with shoulder and elbow surgeries. His fastball velocity was fine at the end of the season, averaging 93.3 mph in the playoffs, the same as the regular season.
Still, he turns 36 at the end of the month, and when you hear things like "36-year-old pitcher" and "shoulder issues" in the same sentence, you have to be worried.
If I'm the Orioles, I'd turn my attention to Rodney, who wouldn't cost more than what Balfour originally received. Rodney wasn't able to match his superlative 2012 season, but did finish with a 3.38 ERA and 37 saves while holding opponents to a .211 average and striking out 11.1 batters per nine innings. Rodney did have some control issues in April and May, walking 19 in 22.2 innings, but was consistent thereafter. From June onward, he struck out 53, walked 17 and didn't allow a home run.
Balfour, meanwhile, served up seven home runs with the A's. Put him in Camden Yards and that could translate into a big problem.
As for the fourth option, there isn't an obvious closer candidate in the current bullpen. Left-handed batters hit .294 and slugged 11 home runs off Tommy Hunter; you can't use a guy with such a large platoon split as closer. Same thing with Darren O'Day; lefties hit .309 and slugged .556 against the sidearmer. Both need to be used strategically. Brian Matusz is similar but from the left side; righties hit .302 off him. The guy with the best splits is actually Ryan Webb, signed as a free agent, who allowed a .244 average against both sides. But he lacks the raw stuff you normally see in a closer, relying primarily on a low-90s sinker.
So the Orioles likely will sign a closer -- whether it's Balfour or Rodney.
The Orioles haven't done much this offseason, failing to bring in the outfielder or starting pitcher that O's fans would have liked; this latest situation isn't going to win them over.