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.Finan said Blue Cross members represent a $200 million book of business with the Franciscans. Nine percent to 10 percent, or $18 million to $20 million, would be a considerable savings to consumers and employers.Reitz said it’s possible that keeping the Franciscan system’s reimbursements the same would mean Blue Cross customers’ premiums would increase by less in the future.Still, the request for an increase runs counter to what customers, Congress and the Obama administration have demanded: that the private market get costs under control, Reitz said. In order to do that, health insurers have to do something about high-cost providers.“They are the highest-paid system in the state, and the requested increase would have put them even higher,” Reitz said. “We offered them something that they were unwilling to participate in so they canceled their participation.”Finan said he doesn’t know if the Franciscan system is paid more than other health systems, and he’s not sure the issue is relevant.The Franciscans said Blue Cross justified its zero-percent increase offer, in part, by describing the system’s mission, which includes care for children, trauma services, people with mental health challenges, people with AIDS, screenings for early detection of cancer or heart disease, as a luxury.“We think we provide high quality service, high quality care, and beneficial services to the community that are under-reimbursed or unreimbursed that others do not,” Finan said.Describing the mission-oriented programs as a luxury is offensive, Finan said.Reitz said Blue Cross is not trying to tell the Franciscans how to run their business.“I am suggesting that the marketplace, our customers, are only willing to pay so much,” Reitz said.If the Franciscans are providing a lot of services not related to patient care, Blue Cross is suggesting that in this economic climate, the Franciscans should look for ways to increase efficiency or put more money into patient care rather than other things, Reitz said. Since the Franciscan system is already the highest-paid, there should be money available for mission-related services if the system is run efficiently.From July to April, the Lake had 52,510 encounters with Blue Cross members, and St. Elizabeth Hospital in Gonzales had 15,198, Lake spokeswoman Kelly Zimmerman said. The Franciscan system had 113,711 encounters in total.Zimmerman said the numbers did not represent total patients seen because there were repeat visits by some patients.