A political battle over suspected hospice fraud in California has pushed a Van Nuys office building into the national spotlight after records revealed 89 hospices are registered there.
The building and the proliferation of hospices in Van Nuys in general are now under the microscope as Republicans look to batter Gov. Gavin Newsom ahead of a potential 2028 run for president.
State auditors previously described excessive clustering of multiples hospices in a single building as a potential indicator of fraud.
Records show about 40 hospices registered to 14545 Friar St. billed Medicare for more than $38 million — or about $28,000 per patient — in 2023, according to the most recently available data from CMS.
That same year, the U.S. Department of Health and Human Services Office of Inspector General estimated hospice fraud topped $198.1 million nationwide.
In the meantime, legitimate hospices are getting caught in the crossfire.
One hospice administrator, who spoke on the condition of anonymity, told the Southern California News Group that at least nine tenants have received demand letters asking for patient records from a third party associated with the U.S. Centers for Medicare and Medicaid, or CMS, and payments from Medicare are frozen pending that investigation.
Some have begun lawyering up and are demanding answers from the property’s management.
“We’re providing the services, but we’re not getting paid,” the administrator said. “We don’t know what to do, and next month, if there are no payments, we cannot pay rent.”
The negative attention in recent months has prompted some tenants to pack up and leave. Property owner Kambiz Merabi said he’s tried offering double-digit discounts on rent, but it isn’t enough.
“Unfortunately, the circulation of unverified statements or assumptions regarding the property has had a negative impact on our business operations and reputation,” Merabi said in email.
In an earlier phone interview, he put it more bluntly.
“A lot of people are leaving the building,” he said. “They’re saying so many things and it is all lies and BS.”
Concerns about hospice fraud in California have become a flashpoint in recent months as Republicans look to replicate a similar strategy employed in Minnesota, where potentially billions of dollars in widespread fraud have been uncovered in social service programs.
A group of Republican congressional representatives authored a letter in January asking the Department of Health and Human Services’ OIG to meet and outline a plan for addressing hospice fraud in Los Angeles County.
Then, Dr. Mehmet Oz, the head of CMS, visited Los Angeles in February and posted a viral video calling out the number of hospices in Van Nuys and fraud-related convictions made in the past year.
A CBS News investigation on March 10 highlighted Los Angeles as “ground zero” for hospice fraud and identified the Friar Street building as the “most extreme case of hospice clustering” in its review of 1,800 licensed hospices in Los Angeles County.
More than 700 of the hospices in the county had “multiple red flags for fraud as defined by the state,” according to the report.
The next day, state Assemblymember Alexandra Macedo, R-Tulare, announced she had uncovered 197 hospice agencies registered at what she described as a “dilapidated building” in Van Nuys. The California Department of Health Care Access and Information’s “Facility Finder” shows 197 hospice and home care providers at the Friar Street building.
A little more than half are hospices, records show.
Sixteen state Republican legislators, including Macedo, demanded Newsom explain how he “intends to address the rampant fraud, abuse and state regulation that allows bad actors to take advantage of both taxpayers and our most vulnerable Californians.”
They argued in a letter that Newsom failed to make the necessary changes in light of a 2021 state audit that warned there was opportunity “for large scale fraud and abuse” in the hospice industry, particularly amid the rapid growth in Los Angeles County.
For decades, California approved new licenses for hospices without investigating if there was a need.
The number of hospices in L.A. County soared from 109 in 2010 to 1,841 in 2021, a 1,589% increase. By comparison, the population in need of such care climbed only 40%, according to the audit.
Newsom’s office, in a statement, said California “cracked down on hospice fraud years ago.” It instituted a moratorium on new hospice licenses in 2021 that continues to this day and launched a multiagency taskforce that revoked 280 hospice licenses in the past two years, with 300 more providers under investigation, according to the statement.
On social media, Newsom’s press office pointed to an Axios article about the Trump administration putting a hospice oversight program on hold last year.
There’s no question that Van Nuys is a hot spot for hospices. CBS News identified nearly 500 operating in a 3-mile radius, with 137 along Van Nuys Boulevard alone.
It is unclear how many hospices are actually operating at the Friar Street building today, as numbers differed wildly depending on the source.
The state audit identified 112 hospice agencies there in 2021. The state’s database suggests 89 hospices are registered today, while federal sources list about 40 certified hospices at that address as of January.
Merabi, the building’s owner, told CBS News his records indicate only 12 hospices are active. He would not provide a number to the Southern California News Group.
“Because tenant occupancy may change as companies relocate, expand, merge or close operations, the exact number of healthcare-related administrative tenants can fluctuate over time,” he said in an email.
State and federal databases are updated slowly and list companies that haven’t existed at the location for years, he said. At times, this created a barrier for new tenants applying for licenses as regulatory authorities still associated a previous hospice’s license with the suite number, Merabi said.
He stressed that tenants are responsible for their own regulatory compliance, licensing and corporate filings. The property performs background checks and verifies licenses exist, he said.
“If they have all of those valid things, we rent an office for the business,” he said. “We don’t track what time they come, or what time they go, or what they do, or not.”
The offices in the building, ranging from one to three rooms, are used for administrative purposes, and clients typically are seen at their homes. A real estate listing suggests some offices are less than 150 square feet.
The building, located a block from Van Nuys Boulevard, is an attractive location because it is clean, safe and relatively low cost, a hospice administrator said, but in recent years, there have been fewer and fewer tenants in the halls.
Despite the high number of hospices registered, none of the signs on the outside appeared to be for a hospice. Signage advertised lawyers, a printing company and even a rooftop lounge.
The administrator who spoke to the Southern California News Group regretted not relocating sooner and planned to move away as soon as possible.
“If the building doesn’t have an issue,” the administrator asked, “why are tenants running from the building?”
