Businessman Pleads Guilty in Arizona Medicaid Fraud Scandal

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An illustration depicting the courtroom where the Medicaid fraud case was held.

News Summary

James Demasi, owner of New Life Wellness Center, has admitted guilt to fraudulent schemes related to his unlicensed health facility in Phoenix. The center, which operated without proper licensing, defrauded Arizona’s Medicaid agency, AHCCCS, receiving over $80 million from 2015 to 2024. Following allegations of billing fraud, Demasi has agreed to repay $25 million as part of his plea deal. The shutdown of the facility has raised concerns about the living conditions for vulnerable clients and broader issues within the healthcare system.

Phoenix – James Demasi, a businessman in Phoenix, has pleaded guilty to charges of fraudulent schemes and illegal control of an enterprise related to his ownership of New Life Wellness Center, an unlicensed health care facility that operated from Thomas Suites motel. The facility primarily catered to clients seeking sobriety by transporting them daily to treatment clinics. Between 2015 and 2024, Arizona’s Medicaid agency, AHCCCS, paid Demasi’s clinics a total of $80 million.

As part of a plea agreement reached in March 2024, Demasi will repay $25 million to the state following a criminal investigation into his operations. Demasi’s actions came to a head after credible allegations of billing fraud emerged, leading AHCCCS to suspend payments to New Life Wellness. This decision drastically affected nearly 150 clients at the Thomas Suites Campus of Care, many of whom were in vulnerable situations.

Former employees of New Life Wellness expressed feelings of betrayal by Demasi and dissatisfaction over inconsistent pay practices. Reports indicate that at least two former employees were owed substantial amounts, approximately $20,000 and $30,000, respectively. Employee accounts revealed a lack of support from Demasi, especially in terms of working conditions and pay consistency. Morgan Valentine, a former employee, recounted unsafe living conditions at the motel where clients were housed, noting that troubles included the City of Phoenix shutting off water multiple times due to non-payment. Residents were often forced to use buckets for basic sanitation needs.

Furthermore, Victor Hernandez, a caterer for the facility, took legal action against Demasi for breach of contract, seeking $435,000 after investing his own funds to provide meals for clients. The Arizona Department of Health Services has already issued fines exceeding $150,000 against Demasi’s clinics. Investigations into New Life Wellness were launched in 2023 following multiple complaints related to its unlicensed operation and allegations of fraud, particularly concerning Native American clients.

Eventually, the facility was shut down as it was classified as a “public nuisance,” and it has since been replaced by a Motel 6 establishment. With the loss of Medicaid funding, Demasi’s operations shifted toward housing parolees, leading to severe conditions where many residents faced inadequate living situations. Community advocate Benjamin Jeffrey highlighted that clients resorted to drawing water from a pool for sanitation, casting a further shadow on the facility’s claims of providing a supportive environment.

Former clients reported not only poor living conditions but also witnessed drug-related activities occurring on the premises, contradicting the facility’s stated purpose. The overarching Medicaid fraud scandal involving Demasi’s clinic practices has exacerbated the hardships faced by numerous vulnerable individuals battling addiction. Allegations against Demasi and New Life Wellness included “ghost billing,” where the business would charge for services purportedly rendered that were actually non-existent, double billing for the same service, and billing deceased individuals.

According to reports, the extensive Medicaid fraud situation has ultimately cost the state around $2.5 billion, raising alarms about the integrity of health services provided to those most in need. The fallout from Demasi’s unlicensed operations reflects broader issues within the healthcare system that jeopardize the well-being of individuals fighting addiction and seeking support throughout Arizona.