A group operating out of a Friar Street office building in Van Nuys that advertises “virtual offices” incorporated 22 hospices and home care agencies in one year, including 15 hospices registered in one day to a single suite, according to an investigation by the Southern California News Group.
The 15 hospices, all formed in “Suite 205” at 14545 Friar St., later collected $12.3 million from Medicare and Medi-Cal billings in 2023 and 2024, records showed.
Each had the equivalent of one full-time employee at the time.
While operating out of the same building is permitted, hospices cannot use the same office, according to Sheila Clark, the president and CEO of California Hospice and Palliative Care Association.
“You cannot co-locate with another provider,” she said.
Related: Van Nuys building where 89 hospices are registered pulled into national fight over fraud
However, these hospices seemingly bypassed that limitation by appending letters from “A” to “P” onto the suite number in official documentation. Suites in the building, however, have only one to three rooms and leases specifically prohibit subdivision of those spaces, according to the property owner, Kambiz Merabi.
Yet Merabi’s website advertises “virtual offices” that give you a “physical business address and office number for your business cards, website, email and registering a new company.” Mentions of that service were scrubbed from his Instagram page as of Friday, but remained on other accounts.
One post specifically advertised to industries needing an address to “obtain licenses.”
“For just $99 per month, you receive 2 hours of private office or conference room usage each month; a professional office address with an actual suite number — not a P.O. Box; mail and package reception; your business listed on our digital directory and within the building’s directory,” the post read. “For industries needing a California or Los Angeles presence to obtain licenses, a suite at the prestigious Merabi Professional Medical Plaza Building provides more than just an address — it offers a full-service business center hub with many perks and services for businesses like yours.”
Hospices are required by law to maintain a physical office, even when caring for patients in their homes or elsewhere.
‘None of this is normal’
The hospices incorporated in bulk on Friar Street did not surprise Clark. She’s been sounding the alarm about fraud risks in Los Angeles’ hospice industry for years now. She flagged dozens of other hospices clustered in that same Friar Street building to state auditors back in 2021, she said.
“It’s not normal,” she said. “None of this is normal.”
It’s unclear how the hospices managed to obtain licenses from the state or certification from the U.S. Centers for Medicare and Medicaid. The bifurcated state and federal process is supposed to include on-site inspections by an accreditation team. Surveys conducted by the state, which did identify deficiencies with the hospices registered to that suite, made no mention of a shared space.
The California Department of Public Health did not immediately provide a response to questions.
In a statement, a CMS spokesperson stressed the federal agency “takes allegations of fraud, waste, and abuse extremely seriously and is committed to aggressively investigating and combating fraud.”
“CMS works closely with the HHS Office of Inspector General (OIG) and Department of Justice (DOJ) to investigate healthcare fraud schemes, referring cases to law enforcement partners as appropriate,” the spokesperson said. “However, to protect the integrity of the oversight process, CMS does not confirm or comment on ongoing or potential investigations into specific providers or individuals.”
Red flags for fraud
Most of the 15 hospices, all incorporated on June 18, 2020, have relocated and changed hands since then, but significant overlap existed among the agencies for years, with several hospices listing the same phone numbers, owners and key personnel. A state report indicated at least one patient was shifted between two of the businesses.
Such overlaps in resources are considered red flags for potential fraud, according to a state audit and a CMS fact sheet.
Three of the hospices were later involuntarily decertified by CMS.
One, originally located in Suite 205-G before moving to Granada Hills, allegedly assigned terminal illnesses to patients who were not, in fact, dying. The hospice could not provide “evidence their licensed providers were qualified and trained to provide hospice services to eight of eight sample patients,” according to a statement of deficiencies.
The daughter of a 77-year-old woman, identified as Patient 9, told inspectors she had not consented to any hospice services.
“Patient 9 was observed to be walking without assistance, verbally responsive and speaks mostly Spanish and responds to English, needed frequent staff redirection, denied pain, and was not in any respiratory distress noted,” the inspector wrote.
The California Department of Public Health flagged the situation as “immediate jeopardy,” which indicates a provider’s noncompliance “has caused, or is likely to cause serious injury, harm, impairment or death to a patient.” The report indicates five patients were at risk of losing hospice eligibility and benefits as a result.
That hospice received $1.3 million from Medicare in 2023. CMS terminated it from the program a year later.
Broker flipped hospices
Four other hospices continued to use variations of Suite 205 as their address when billing Medicare and Medi-Cal in 2024.
Arsen Der-Aprahamian, a business broker whose name appeared on initial incorporation records for five of the 15 hospices, said the businesses were flipped and that he is no longer associated with any of them.
“Often, I used my name and phone number; I don’t own any of them,” he told the Southern California News Group. “Those companies have been sold.”
Several, including three hospices that billed Medicare, still listed his name or phone number in databases maintained by state and federal regulators. He was listed as the person who filed the annual paperwork for one of the hospices in 2024.
Der-Aprahamian hung up shortly into the interview. When a reporter called back, he said he was too busy to talk and asked for questions by email. He did not respond.
A CMS spokesperson said applications for Medicare enrollment require individuals to certify that they are legitimately associated with the provider. A hospice could have its enrollment denied or revoked “for providing false or misleading information.”
Attempts to contact the others listed on the incorporation records were unsuccessful. One is part owner of a rental company with Der-Aprahamian. Another appeared to be a relative of that person.
A fourth person is listed as the owner of a hospice that relocated from Suite 205 to Montebello. Someone who picked up the phone at that hospice identified herself as the administrator but then claimed to be someone else.
“We’re just the buyer,” she said at one point.
She declined to elaborate and said she would take a message for the owner. No one returned the call.
Flipping hospices, while frowned upon, was legal and had few restrictions at the time. But CMS instituted a “36-month rule” in 2024 that prevents changes in ownership, or transfers of billing rights, in the first three years.
Frequent ownership changes can make it difficult for patients to know who is running a hospice and increase the risks of fraud, experts say.
“Technically, there isn’t any specific prohibition on forming a hospice business and later selling it,” said Catherina Isidro, executive director of California Health Advocates and statewide director of the Senior Medicare Patrol. “However, concerns arise when entities are created in large volumes, not for the purpose of delivering care to Medicare beneficiaries, but for the sole purpose of being transferred or sold, which then creates misuse of Medicare dollars.”
Senior Medicare Patrol works with Medicare beneficiaries and their families to prevent, detect and report health care fraud, errors and abuse.
The state system for licensing hospice facilities and the federal system overseeing Medicare enrollment assume entities entering the program “intend to provide legitimate care,” Isidro said.
“The way I see it, prior to the moratorium that was put in place back in 2021, there was no cap on the number of hospice licenses in a geographic area and less scrutiny of ownership,” she said. “And so when CA experienced this significant increase in hospice applications around 2020-2021, during that time, the system didn’t really have a viable or strong mechanism to limit these clusterings, let alone fully evaluate whether these new hospice providers aligned with the need within that community.”
Previous warnings ignored
A 2021 state audit indicates concerns were “raised about the legitimacy” of certain hospices and home health agencies located in the Friar Street building, but no action was taken by state agencies.
The California Department of Public Health’s investigators found a hospice agency’s door locked and the phone disconnected. The owner failed to show up for three days of scheduled meetings.
She later told investigators her group had just bought the agency, but had not submitted a change of ownership application. One still had not been submitted 10 months later, the audit noted.
“The owner was not able to answer questions regarding the agency,” the state audit found. “When asked about her title/position with the agency, the owner replied, ‘We have not decided yet.’”
Asked about hospices in Suite 205, Merabi, the property owner of 14545 Friar St., said in an email that a consultant “previously assisted individuals interested in establishing hospice-related businesses and locating office space.”
“From time to time, that consultant introduced prospective tenants who wished to lease office suites for administrative purposes,” Merabi wrote. “Any corporate filings, licensing submissions, or regulatory registrations made by those individuals or entities were completed independently by them, and responsibility for those filings rests with the respective businesses and the relevant regulatory authorities.”
Some tenants were permitted to add letters to their suite numbers when one hospice moved out and another took over the same space to “help distinguish office locations for regulatory and mailing purposes,” Merabi said, but it did not reflect any physical subdivisions to those offices.
Merabi was initially asked about five hospices registered to Suite 205. Those tenancies had “ended at various times, including during 2023, 2024, and one within the past several months,” he said.
Merabi did not respond to follow-up questions as more hospices were uncovered.
Payments frozen, licenses revoked
CMS recently froze payments to 10 tenants inside the building and has demanded records before those payments will resume, according to a hospice administrator who received one of the letters. Others moved out as a national spotlight was cast on the building in an attempt to blame Gov. Gavin Newsom’s administration for failing to address hospice fraud in California.
Der-Aprahamian and two others registered seven more hospices and home care agencies to other suites in the building on May 5 and May 6, 2021, but those businesses seemingly did not get off the ground. Five have since terminated their business licenses.
At the time, California had begun to crack down on the rapid and potentially fraudulent growth in the hospice industry, particularly in Los Angeles County. A statewide moratorium prohibiting the licensing of new hospices went into effect not long after and is still in place today.
The state revoked 280 hospice licenses in the past two years and another 300 providers are under investigation.
LA ‘ground zero’ for fraud
Clark, the president of the California Hospice and Palliative Care Association, attributes the explosion of hospices in California — and the corresponding surge in fraud — to the clustering of questionable hospices seen on Friar Street and throughout Van Nuys. Her association has advocated for stronger reforms and broad moratoriums on new licenses and Medicare enrollments in the hopes of stopping elderly patients from getting scammed.
“That is why we call Los Angeles ‘ground zero,’” Clark said. “That’s what we’ve seen, just this huge number of providers that would ask for licenses at a particular address and the same people would churn and burn those licenses.”
The number of hospices in the five-county Greater Los Angeles area spiked from 722 in 2018 to 1,799 in 2024. Today, the same region — L.A., Orange, San Bernardino, Riverside and Ventura counties — accounts for nearly a quarter of the hospices in the country.
A state database lists 89 hospices at 14545 Friar St., the office building where the 15 hospices were incorporated in a single day, though the property owner argues only about 12 are active as of this month.
Hundreds of others are registered within blocks of that location.
A CBS News investigation earlier this month 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 all the licensed hospices in the county.
More than 700 had “multiple red flags for fraud as defined by the state,” according to the report.
Clark describes the process as “stacking,” in which new hospices incorporate in one location and even obtain state licenses, but then do not enroll with CMS right away. Hospices can sit in limbo for years until activated.
Once one gets burned, the owners spin up the next one, sometimes transferring patients between the entities, which she calls “beneficiary trafficking.”
Other hospices are sold so frequently that legitimate buyers further down the chain don’t even know who the original owner is anymore, Clark said.
Legitimate hospices demand crackdown
The rampant fraud in the industry became so bad that legitimate providers began calling for more regulations and oversight. They’re now begging the state and federal government to “raise the bar” for all hospices and home care providers.
“Our patients and families deserve better and they are getting scammed,” Clark said.
Clark and others met with officials from CMS under the Biden administration in 2024 and assembled a panel of physicians to make recommendations for needed reforms.
“All five of the physicians said (requiring) a working phone number for a hospice would be a good start,” she said.
Last week, the California Hospice and Palliative Care Association and two other organizations sent a letter to Dr. Mehmet Oz, the head of CMS, urging him to block new enrollments in Medicare from California hospice and home health care agencies until “more durable corrective measures are developed and implemented.”