A conviction in the federal fraud case against Chesapeake Regional Medical Center could bar the hospital from receiving Medicare, Medicaid and other federal health care payments, which legal professionals said could threaten its ability to stay open.
The hospital was indicted in January 2025 on one count of health care fraud and one count of conspiracy to defraud the United States. The charges stem from unnecessaries procedures performed at the hospital by former OB-GYN Javaid Perwaiz.
Federal prosecutors allege Chesapeake Regional officials were aware that Perwaiz was doing unnecessary surgeries and misclassifying procedures when seeking reimbursements from insurance providers.
Between 2010 and 2019, the hospital received $18.5 million from public and private benefit providers for procedures Perwaiz performed.
Chesapeake Regional has pleaded not guilty.
The U.S. Department of Health and Human Services Office of Inspector General told WHRO that federal law requires it to exclude individuals and organizations convicted of Medicare or Medicaid fraud and crimes related to services provided through those programs.
An excluded hospital cannot receive federal health care program payments for the services it provides, orders or prescribes, said Senior Public Affairs Specialist Katherine Harris.
Scott Grubman, a health care attorney in Atlanta, said the loss of federal payments could have a major effect on the hospital.
“That means they can't accept Medicare (or) Medicaid patients,” Grubman said. “They can't accept any federal money, and usually that's the end of a hospital because if you can't accept Medicare/Medicaid payments, you're not going to be able to stay in business, likely.”
Grubman said criminal charges against an entire hospital like Chesapeake Regional Medical Center are “very rare.”
He said exclusion from federal programs could also cause private insurers to reconsider their contracts with Chesapeake Regional. Private insurance agreements often require hospitals to remain eligible for Medicare and other federal programs, he said.
“So not only could they face losing the federal health care programs, but then soon after that, I would suspect that all of the private health insurance companies would terminate their contract,” Grubman said.
The federal indictment alleges Chesapeake Regional billed health benefit programs for surgeries and other procedures Perwaiz performed despite repeated warnings about his conduct.
Perwaiz was convicted in November 2020 of 52 counts of health care fraud and false statements. About 38 of those counts involved procedures at Chesapeake Regional, including unnecessary hysterectomies, medically unjustified early labor inductions and sterilizations of Medicaid patients without the required advance consent forms.
He was sentenced in 2021 to 59 years in prison.
The indictment alleges Chesapeake Regional officials knew Perwaiz had previously been suspended for unnecessary surgeries, had a federal tax fraud conviction and faced repeated concerns from staff, but continued renewing his privileges through 2019.
Grubman said Chesapeake Regional could avoid a conviction by winning at trial or reaching another type of agreement with prosecutors.
A deferred prosecution agreement, for example, could require the hospital to pay large fines, change its compliance practices or meet other conditions in exchange for the eventual dismissal of the charges, Grubman said.
“The government understands, I think, or at least they should understand that if a hospital like that went out of business, it wouldn't be good for the people of the community,” Grubman said.
In a statement, Chesapeake Regional said it remains focused on patient care and the hospital’s financial and operational stability.
“The organization has also taken concrete steps to strengthen its compliance function, including hiring an independent external expert to review its compliance program, enhancing the role of compliance leadership, formalizing an annual compliance workplan, updating training and including medical necessity as part of its billing audit process,” said spokesperson Tricia Hardy in a statement sent to WHRO.
