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Former hospital pharmacist, whistleblower alleges he was fired for pointing out fraudulent ASC billing

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David Schwartz, former pharmacy director of a Dallas hospital, alleges that he was fired for airing concerns that an affiliated surgery center was fraudulently overbilling state and federal payers, according to Bloomberg Law.

Seven notes:

1. Dallas-based defendants USP Texas and North Central Surgical Center, which were Mr. Schwartz's joint employers, decided to build an outpatient surgery center in the same building as the hospital. Mr. Schwartz was tasked with "implementing the ASC," according to court documents filed June 8.

2. The defendants filed an application with Texas Health and Human Services for the ASC to be categorized and allowed to bill as a hospital outpatient department, which would have entitled the center to bill third-party payers at a higher reimbursement rate, but the center was granted a license to operate only as an ASC.

3. Around June 2018, the hospital's CEO and associate chief nursing officer told Mr. Schwarz that the surgery center would operate as a HOPD, despite the denial of the HOPD application, according to court documents.

4. The defendants allegedly created medical and pharmacy billing systems that "comingled" operations of the ASC with those of the hospital, so the ASC would be billed at the higher rates. 

5. Mr. Schwarz said he informed the defendants that the comingling would result in commercial payers, CMS and state Medicaid being overcharged, which would be committing fraud against both the U.S. government and the state of Texas.

6. Shortly after his conversation about fraud to his employers, Mr. Schwarz said he was falsely accused of taking drugs from the hospital and later placed on administrative leave. The accusation was based on him taking a Tylenol tablet from the employee-designated medicine cache to relieve a headache, as authorized by standard practice, according to court documents. Mr. Schwarz’s employment was later terminated.

7. Mr. Schwarz said that he was terminated "as a retaliatory adverse action" meant to punish him for his opposition to the alleged scheme, according to court documents. He is seeking damages, interest, attorneys' fees and costs for the alleged unlawful acts.

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