On January 8, 2025, a federal grand jury in Virginia returned an indictment against a hospital. This rare criminal event in healthcare alleges that Chesapeake Regional Medical Center conspired to defraud the United States and committed healthcare fraud. Hospitals are almost never criminally charged, as federal investigations into hospitals are nearly always civil proceedings under the False Claims Act. This post explains how this hospital’s alleged actions rose to the level that merited criminal indictment.

 The vast majority of criminal cases are against individuals, but corporate entities can be charged too. Oftentimes, criminal action against companies comes in the form of deferred prosecution agreements to address specific conduct and to impose agreed-upon remedies, like monitors. For example, Volkswagen pled guilty to a criminal charge in 2017 relating to an alleged conspiracy to defraud U.S. emissions testing, and TD Bank pled guilty in 2024 for alleged anti-money laundering program failures. But indictments against companies are rare. And even more rare is an indictment against a company that isn’t part of a pre-arranged global resolution of the charges. Such acts are reserved for the most egregious of conduct.

So how did a Virginia hospital find itself criminally charged?

The story begins with heinous acts committed by an obstetrician-gynecologist with privileges at the hospital. Dr. Javaid Perwaiz was indicted and convicted following trial in federal court of healthcare fraud. The evidence at trial proved that Dr. Perwaiz tricked patients into hysterectomies by falsifying diagnoses like cancer. Dr. Perwaiz sidestepped Medicaid’s 30-day waiting period for elective sterilization by backdating forms.

Additionally, the evidence at trial showed that Dr. Perwaiz would induce his patients into early labor to ensure that he could perform the delivery and receive the reimbursement. To support early delivery, Dr. Perwaiz was alleged to have falsified records to make it appear as though early delivery was not actually early. Separately, Dr. Perwaiz was alleged to have submitted claims for diagnostic procedures that he only pretended to perform.

Dr. Perwaiz was convicted of healthcare fraud following trial, and at sentencing found to have caused $20.8 million worth of fraudulent billings to health programs, both for himself and the hospitals where his fraudulent procedures were performed. For this conduct, a federal judge sentenced Dr. Perwaiz to 59 years in prison—among the highest sentences ever for a federal healthcare crime.

Dr. Perwaiz was sentenced in May 2021. The hospital was not charged until January 2025. While it is unclear what transpired in the nearly four years between Dr. Perwaiz’s conviction and the hospital’s indictment, it is not unreasonable to conclude that resolution discussions did not go well.

The hospital indictment alleges that Chesapeake Regional knew that Dr. Perwaiz was inducing early delivery of babies. According to the indictment, Dr. Perwaiz would give Chesapeake Regional staff two sets of documents when he was planning on causing early delivery—one with an accurate due date and then another with a falsified due date, designed to appear as though the early induced delivery was actually being conducted at a proper gestational age. The indictment alleges that Chesapeake Regional employees knew about Dr. Perwaiz but continued to allow Dr. Perwaiz to perform the procedures. Chesapeake Regional then billed Medicaid and other healthcare programs.

In addition, a number of Dr. Perwaiz’s sterilization procedures on Medicaid patients occurred at Chesapeake Regional. The indictment alleges that Chesapeake Regional knew that Dr. Perwaiz’s sterilization procedures were without valid consent forms, and that Chesapeake Regional employees nevertheless continued to allow Dr. Perwaiz to perform the procedures.

What is next for the indicted hospital?

The hospital will now decide whether to proceed to trial or to plead guilty. Pleading guilty would likely involve a significant fine and some fashion of monitorship or corporate integrity agreement.

If the hospital proceeds to trial, for the prosecution to obtain a conviction, a jury will need to conclude beyond reasonable doubt that the hospital agreed with Dr. Perwaiz to commit an unlawful act, and for the healthcare fraud charge, that the hospital intended to defraud Medicaid and other health programs by knowingly allowing Dr. Perwaiz to induce early labor using falsified documents in its hospital.

Included in the indictment is a forfeiture allegation, meaning the prosecution could seek an order requiring the hospital to forfeit to the United States all property directly or indirectly derived from healthcare fraud.

What can health systems learn from this indictment?

Criminally charging a hospital is very rare. It takes extreme conduct for the Justice Department to conclude that criminal charges, instead of civil False Claims Act proceedings, is in the interests of justice. Without question, Dr. Perwaiz’s conduct was extreme, but it is unclear the extent to which the hospital knew the full scope of Dr. Perwaiz’s actions. But the indictment alleges that some people within Chesapeake Regional knew of the unlawfulness of the conduct.

The major lessons from the Chesapeake Regional indictment for health systems are: (1) illegal conduct by doctors performed at a health system can result in significant problems for the health system, and (2) knowledge of a health system’s employees can be attributed to the health system as a whole.

For the first point—that illegal conduct by doctors can become a hospital’s own illegal conduct—hospitals must keep tabs on what doctors are doing in their hospitals. Illegal conduct of any type that should be easily discovered by a hospital exercising reasonable diligence needs to be discovered. The Justice Department and healthcare regulators will not look favorably on hospitals that turn a blind eye to bad conduct. And so hospitals must have compliance systems in place that are designed to catch illegal conduct by physicians on hospital premises. Failing to catch bad conduct by doctors could be catastrophic for a hospital, as Chesapeake Regional has learned here.

Second, when hospital employees learn of illegal conduct, that knowledge often becomes legally attributed to the hospital itself. Therefore, it is vital that hospital employees are properly trained to know (a) what is illegal and what is not, and (b) to speak up when they spot someone doing something wrong. With Chesapeake Regional, the indictment alleges that hospital employees routinely received two sets of forms for Dr. Perwaiz’s early induced labor cases—one real and one fake. That sparked knowledge for Chesapeake Regional. What followed is not entirely clear from the indictment, but either those employees receiving the two sets of forms either did nothing or they spoke up, but their objections fell on deaf ears. Regardless, that employee-level knowledge ended up turning a problem with Dr. Perwaiz’s actions into a criminal-level problem for the hospital. And so, hospitals must take steps to ensure that employees know to speak up when they spot illegal conduct, and for compliance systems to vet the information and take actionable steps. That did not happen here, if the allegations in the indictment are true.

In sum, this case shows that hospitals are expected to stop illegal conduct. From the Justice Department’s perspective, hospitals ought to have the resources and compliance systems to catch egregious criminal conduct, and when hospitals fail to exercise their oversight function and instead join in on the conduct, hospitals could be criminally charged along with the physician. It is critical for hospitals to take seriously this oversight function and to prioritize compliance in a demonstrable way, or more health systems could find themselves the subject of criminal proceedings.