Doctor, staffers indicted

Michelle Casady

May 2, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- Dr. Nancy Scheinost, her office manager, Kristine Clifford, and her billing clerk, Denise Trejo, surrendered to authorities Friday and were booked into the Brazos County Jail.

They all posted bail and were immediately released.

Scheinost, a rheumatologist, and Clifford were indicted on three counts of insurance fraud, which is a state jail felony, and one count of tampering with evidence, a third-degree felony. Trejo was indicted on three counts of insurance fraud.

Authorities said Scheinost, Clifford and Trejo were committing fraud -- an estimated $300,000 worth -- against Blue Cross Blue Shield and Medicare by billing for office visits or medical services that were not performed and by charging for massage therapy under a billing code meant for physical therapy.

Jim James, one of Scheinost's attorneys, said he couldn't comment on the facts of the case because of ethical issues but said Scheinhost's practice remains open and she is seeing patients.

"I can tell you that Dr. Scheinost is a fine person and wonderful doctor," James said.

Kyle Hawthorne, who represents Clifford, said his client would plead not guilty but declined to comment further, saying he had only learned of the indictment hours earlier.

No one responded to messages left at the home and office of Kyle Davis, Trejo's attorney, Friday.

The charges

Massage therapist Nikkie Marchant told Bryan police Feb. 4, 2008, that files that she kept in her office had been stolen, according to court documents. She was an independent contractor doing message therapy in Scheinost's office, and most of her patients were referred to her by Scheinost.

Marchant told police that three days earlier she had notified Scheinost's staff that she planned to relocate her massage therapy business because of a conflict with the doctor, documents state.

The therapist told police that she planned to remain through the end of the month but was notified within a day or two through a mutual friend who is an attorney that her services were no longer needed at Scheinost's and to pick up her property Feb. 4. Marchant said all her belongings, personal property and furniture were in the hallway when she arrived, documents state.

She said she inspected her filing cabinet when she got home and noticed that files for 350 patients billed through Scheinost's office had been removed, but she remembered locking the cabinet and was the only one with a key, according to documents.

Marchant told police that she knew why the files were missing. She said that over several months leading up to the early February departure, several of her clients told her they had been billed for office visits with Scheinost that never took place. She said she confronted Clifford and Scheinost about the bogus charges and told them they amounted to insurance fraud, documents state.

Bryan Detective Lori Berndt interviewed a locksmith who said Scheinost took him into Marchant's office Feb. 2, 2008, saying she needed to get into a file cabinet but had lost the keys, the documents state.

About that same time, College Station Assistant police Chief Scott McCollum said, he received a phone call from Scheinost saying she was concerned that Marchant had taken her files and that she wanted to hire a locksmith. McCollum eventually realized that she wanted to get into the cabinet to get Marchant's files and told her not to do so but recommended that she consult a civil attorney, documents state.

Within days, Marchant's attorneys demanded the missing files, but Scheinost faxed only part of the information, documents state, detailing how the doctor later returned some, but not all of the files, and cited medical privacy concerns.

In March 2008, the detective and FBI agents served a search warrant at Scheinost's office, looking for Marchant's files and evidence of other potential fraud, the detective wrote in her report. They didn't find Marchant's original files but did find copies of some behind Clifford's desk, according to documents.

Five weeks later, 78 files belonging to Marchant were returned and handed over to the detective, who wrote that "many of these files appeared to me to be incomplete and had seemingly been tampered with. Many documents that should have been originals were copies."

Multiple subpoenas were filed and witnesses interviewed, but the detective wasn't able to locate the documents, she wrote in court documents.

A coding issue

A break came when the detective researched how Blue Cross Blue Shield requires numerical codes for different treatments. The officer noticed that Scheinost had charged to Blue Cross an estimated $270,000 and another $30,000 to Medicare for Marchant's services, but the coding wasn't for massage therapy -- it was for manual therapy, which covers physical therapy, speech pathology and occupational therapy, according to documents.

The detective consulted with a fraud investigator with Blue Cross Blue Shield, who is a former FBI agent, who told her that Blue Cross doesn't pay claims for a massage therapist, so if Scheinost's office had correctly coded the billing, the payments would have been denied.

It was the same case with the 18 patients' files involving Medicare, documents state, outlining how Medicare also doesn't pay for massage therapy.

In December 2008, the detective met with the management company that did billing for Scheinost in 2005 and 2006. The CEO told the officer that he personally met with the doctor, Clifford and Marchant in January 2006 and told them that Medicare didn't allow her to bill Marchant's services under the coding she was using.

Documents state that while Scheinost stopped billing Medicare for Marchant's services in 2006, she resumed in 2007, but never stopped billing Blue Cross.

Looking for evidence

Several weeks ago, a search warrant signed by District Judge J.D. Langley was served at Scheinost's office at The Physicians Center.

The April 16 warrant sought all documents relating to office visits that were billed but did not actually occur, as well as all documents relating to refunds to insurance companies for the office visits that did not occur.

Among the items police were looking for were fee tickets, patient files, medical notes, massage therapy and billing records, prescription forms and personnel files.

Police sought documents relating to a management company and a billing service, as well as to Blue Cross Blue Shield and Medicare regarding physical therapy and message therapy.

Officers recovered 30 documents, files, manuals and other items from the search.

Brazos County First Assistant District Attorney Shane Phelps said from here, the case will be assigned to a court and an arraignment will be scheduled. It was unclear when the arraignment would be set.

Officials with the Texas Medical Board said Scheinost has been licensed to practice medicine in Texas since March 4, 1994. She's never had any disciplinary action taken against her, a spokesman for the board said.

Newstex ID: 34609151