• By TED GRIGGS
• Advocate business writer
• Published: Dec 10, 2009 - Page: 1A

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A dispute over insurance payments has stalled contract negotiations between the state’s largest health insurer, Blue Cross and Blue Shield of Louisiana, and the state’s largest health system, Franciscan Missionaries of Our Lady Health System.

On Wednesday, Blue Cross, which covers more than 1 million people, announced that the Franciscans, the parent company of Our Lady of the Lake Regional Medical Center and five other hospitals statewide, had decided not to renew its contract and would drop from the Blue Cross network effective Feb. 1.

The Franciscan system also includes The Tau Center of Baton Rouge; St. Elizabeth Hospital in Gonzales; Our Lady of Lourdes Regional Medical Center and Heart Hospital of Lafayette, both in Lafayette; St. Francis Hospital’s two campuses in Monroe; and Assumption Community Hospital in Napoleonville.

A split would also affect the customers of Blue Cross subsidiaries HMO Louisiana Inc. and Benefit Management Services, according to Blue Cross.

Both sides left the door open for continued contract negotiations, which if unresolved could affect tens of thousands of Baton Rouge-area residents and even more statewide. Patients who go to out-of-network facilities pay higher costs.

Two years ago, the groups struck a last-minute deal for a two-year contract after weeks of public wrangling over rates.

In the latest negotiations, Blue Cross Chief Executive Officer Mike Reitz said the insurer has spent months working with the Franciscan Missionaries to better understand its cost structure and the health system’s needs.

“Unfortunately there was no justification for us to pay them the requested amount,” Reitz said.

The Franciscans had asked for a single-digit increase in reimbursements, Reitz said. Blue Cross countered with a smaller increase or a contract extension, which still meant the Franciscans would receive Blue Cross’s highest payment rate in the state.

The Blue Cross announcement caught the Franciscan health system by surprise, Chief Executive Officer John Finan said. But it was probably part of the insurance company’s negotiating strategy.

Finan said he and Reitz met just hours before the announcement. The Franciscan Missionaries expected the next step in negotiations would be to bring in a mediator to resolve the dispute, he said.

“This whole thing kind of defies logic,” Finan said. “Blue Cross is asking us to accept a zero or minimal increase in payments while they have already increased premiums.”

The health system would be happy to consider little or no increase if the resulting savings went to patients and their employers rather than Blue Cross, Finan said. Blue Cross had indicated it will increase premiums by 9 percent to 10 percent in 2010.