Norfolk, Va.-based Sentara Health is seeking a 6.2% blended reimbursement increase from Anthem Blue Cross and Blue Shield of Virginia for 2027. The insurer countered with an approximately 1% decrease, according to Sentara Executive Vice President and Chief Administrative Officer Aubrey Layne Jr.
The gap has pushed the organizations closer to a potential split after eight months of negotiations. Sentara issued formal notice July 31 that it intends to allow certain commercial, Medicare and Medicaid agreements to expire if the parties cannot reach a new deal.
Most affected commercial and Medicare agreements remain in effect through at least Dec. 31, 2026. The Medicaid agreement runs through Jan. 28, 2027, and other contracts expire on a rolling basis during 2027. Nearly 380,000 Anthem members across Virginia could be affected, including about 215,000 in the Hampton Roads region, according to Mr. Layne.
“As a not-for-profit health system, every dollar we receive goes back into our mission, not to shareholders,” Mr. Layne said. “Our existing rates with Anthem already do not support what it takes to deliver care — and Anthem is asking us to accept even less.
“Furthermore, this is at a time when hospitals are facing significant financial impacts and decreased reimbursements from HR 1. We cannot accept an arrangement that requires us to absorb significant losses for critical patient care so that a corporation which continues to report billions in annual profit can make even more. We remain ready to reach a fair agreement — and Anthem must come to the table prepared to do the same.”
The negotiations offer a window into a broader reimbursement challenge confronting hospitals: Government payment pressure, rising uncompensated care and persistent expense growth are raising the stakes of commercial payer talks.
A widening gap at the negotiating table
Sentara’s requested 6.2% increase is a blended figure across multiple commercial, Medicare and Medicaid agreements. Mr. Layne said the proposal was intended to account for the healthcare-specific effects of inflation, including higher labor, drug and supply costs.
Anthem’s counterproposal represented an approximately 1% reduction across the agreements, he said.
“We’re seeking what we believe is pretty much just continuing the relationship that we had, accounting for the economic factors that have happened over the last few years of this contract,” Mr. Layne said during a July 31 press briefing.
General inflation figures do not fully capture hospitals’ expense pressures, particularly amid shortages of physicians, nurses and other healthcare workers, he said. Sentara generates about $14 billion in annual revenue and typically operates at a 3% to 5% margin, leaving roughly $400 million to $500 million to reinvest in facilities, staffing and community programs, according to Mr. Layne.
A reimbursement cut would force difficult decisions regarding services, hiring and patient capacity, he said.
A spokesperson for Anthem told Becker’s the insurer is negotiating in good faith and remains optimistic the parties will reach an agreement before the contracts expire.
“Anthem has a responsibility to negotiate on behalf of the members, employers, and taxpayers we serve to help ensure we provide access to high quality and affordable care for members,” the insurer said in a statement. “These negotiations should not burden the patients and communities we jointly serve, and we remain optimistic we can reach an agreement before the current contract expires.”
Anthem also said it was “disappointed” that Sentara made the talks public before their completion. Sentara said issuing a termination notice is a standard contractual step that does not prevent the parties from reaching an agreement.
Unpaid claims add another layer to the dispute
The disagreement extends beyond future reimbursement rates.
Sentara alleges Anthem owes the health system more than $105 million for claims unpaid for more than 90 days. It also alleges the insurer has not paid $12 million tied to a 2025 billing settlement and has withheld more than $4 million by downgrading the severity of emergency department visits.
Mr. Layne characterized the payment disputes as part of the financial pressure surrounding the contract talks.
Sentara has contrasted its nonprofit structure with Anthem parent company Elevance Health’s obligations to shareholders. The health system said it reinvests revenue exceeding expenses into patient care and community programs, while Elevance reported $197.6 billion in operating revenue and $5.7 billion in net income in 2025.
Anthem, meanwhile, framed its negotiating position around affordability for members, employers and taxpayers.
That disagreement reflects a recurring fault line in payer-provider contract disputes. Hospitals argue commercial reimbursement must keep pace with labor, pharmaceutical and supply expenses while helping offset losses from government programs and uncompensated care. Payers argue large rate increases ultimately flow through to employers and members in the form of higher premiums and out-of-pocket costs.
For patients, the immediate stakes are network access. Sentara said a failure to reach an agreement could result in higher out-of-pocket costs, disrupted physician relationships and fewer care options for Anthem members beginning Jan. 1, 2027. Seniors, people with disabilities and lower-income families may have less flexibility to absorb those effects, the health system said.
Why commercial negotiations are taking on more weight
Mr. Layne said the talks cannot be separated from changes in federal healthcare policy. He estimated that provisions stemming from HR 1 could put about $700 million of Sentara’s revenue at risk
Reductions in federal healthcare spending will ultimately result in fewer people having coverage, fewer covered services or lower payments to providers, according to Mr. Layne. A rise in uninsured patients would also increase charity care and emergency department use, placing more pressure on hospitals’ commercial contracts.
“People think just because they cut Medicaid rates that that doesn’t affect commercial. That is untrue,” Mr. Layne said. “When you go into the emergency room, you want to get access [to care]. There’s going to be more people in there because they no longer have coverage. Now their only measure of coverage is in the emergency room.”
Commercial, Medicare and Medicaid reimbursement must be viewed together because each affects the health system’s overall ability to fund care, he said. Although Medicare and Medicaid rates are generally set through government policy rather than conventional provider negotiations, Anthem administers Medicare and Medicaid managed care products that are included in the parties’ agreements.
Mr. Layne said Sentara is already seeing patients lose insurance and return as charity care cases. He expects some of the financial effect of government reimbursement reductions and coverage losses to move into the commercial market.
The pressure will not fall evenly across hospitals or states. Virginia has used state-directed payments to increase Medicaid reimbursement, meaning federal limits on those arrangements could have a larger effect there than in states where Medicaid rates remain below Medicare levels, according to Mr. Layne.
Larger health systems may have enough scale to resist unfavorable commercial terms. Smaller hospitals with less negotiating leverage may have little choice but to accept the rates proposed by dominant insurers, he said.
That imbalance could accelerate consolidation as independent and rural hospitals seek the scale needed to withstand reimbursement pressure. Contract disputes may also become more consequential as providers and insurers determine who will absorb federal funding reductions, rising labor costs and increased uncompensated care.
“I don’t think these are going to be just normal contract negotiations,” Mr. Layne said. “These negotiations take on a whole different meaning.”
Sentara and Anthem both said they remain committed to reaching an agreement. Until the current contracts expire, Anthem members can continue receiving care from Sentara hospitals, physicians and other facilities at in-network rates.
At the Becker's 5th Annual Fall Payer Issues Roundtable, taking place November 2–3 in Chicago, payer executives and healthcare leaders will come together to discuss value-based care, regulatory changes, cost management strategies and innovations shaping the future of payer-provider collaboration. Apply for complimentary registration now.