Phoenix motel used as unlicensed health care center tied to clinic convicted of AHCCCS fraud

Unlicensed treatment facility in motel linked to multi-million dollar fraud case

PHOENIX - FOX 10 Investigator Justin Lum is uncovering how an unlicensed treatment facility operated out of a Phoenix motel with ties to a multi-million-dollar fraud case.

The Medicaid fraud scandal has cost the state $2.5 billion and displaced thousands of vulnerable people fighting drug addictions.

A majority of the victims are Native Americans, and some are recruited from reservations to get treatment that's rarely provided.

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What we know:

Thomas Suites has been on the radar of investigators for a while now.

FOX 10 obtained records from Arizona's Department of Health Services (AZDHS), which include a cease-and-desist order served to Thomas Suites.

Thomas Suites was fined more than $150,000 in civil penalties. Now, we’re learning more about living conditions from just months ago.

Thomas Suites was operated in the heart of Phoenix near SR 51 and Thomas Road. This facility is now shut down, AZDHS says, and it appears a Motel 6 is taking its place.

Back in November 2024, FOX 10 cameras documented residents living at what state investigators deemed an unlicensed health care institution and a "public nuisance inimical to the public health and safety."

What’s left of Thomas Suites’ social media describes it as a "transitional living facility for men and women reentering society from incarceration," but that’s not what the program started out as, AZDHS says.

Timeline:

AZDHS began investigating Thomas Suites back in 2023 after receiving a complaint that said Native American families and individuals were being housed in an unlicensed motel.

In August 2024, AZDHS issued a cease-and-desist after learning nearly 150 people lived at Thomas Suites, received counseling, and drug testing at the unlicensed facility.

Investigators also observed an office with a locked safe for medications designated for several residents.

Documents say clients were transported from Thomas Suites to a clinic called New Life Wellness multiple times a week.

Both Phoenix and Flagstaff locations for New Life Wellness had been suspended by AHCCCS, the state’s Medicaid agency, the year before in May 2023 over credible allegations of fraud.

Suspension letters accused New Life Wellness of "ghost billing," which means billing for services never provided, also double billing claims for a member who was receiving care at another facility, and even billing for people who were dead.

James Demasi on the left.

Well, in March 2024, a judge told the owner of New Life Wellness, James Demasi, "On behalf of New Life Wellness center, they are charged with count one, fraudulent schemes and artifices, a class two felony. A non-repetitive offense committed between November 8th, 2020 and May 31, 2023. Do you understand the charge?"

He replies, "I understand, your honor."

The judge asks, "How do you plead to count one?"

Demasi says, "That is correct."

The judge clarifies, "Do you plead guilty or not guilty?"

Demasi says, "I plead guilty, yes."

On behalf of both New Life Wellness locations, Demasi took a plea deal from the Arizona Attorney General’s Office, pleading guilty to fraudulent schemes and illegal control of an enterprise.

The judge ordered that he must pay $25 million in restitution to the state.

What they're saying:

With AHCCCS officially terminating New Life Wellness locations, his business at Thomas Suites pivoted, bringing in parolees under the supervision of the Arizona Department of Corrections, Rehabilitation and Reentry.

Benjamin Jeffrey is a community advocate who stepped up to help residents of Thomas Suites last November.

Benjamin Jeffrey, community advocate

"At the end of the day, they were living in deplorable conditions. They were living in a health and safety hazard environment, but it was better than being on the streets," Jeffrey said. "I've got 150 to 175 people in this hotel. There is no running water. They are drawing buckets of water out of the swimming pool to flush the toilets, and they cannot take a shower. So, it quickly became a health and safety situation."

Demasi wasn’t paying his bills. This was the third time water was shut off to Thomas Suites, the city of Phoenix says.

Jeffrey says he galvanized other local organizations to help get residents temporary housing, but the city turned the water back on, so despite the issues, many residents chose to stay.

"The residents were being told, 'You don't have to come out, you don't have to accept help,'" Jeffrey said.

‘There was crime, drug dealing, no running water'

Remember that cease-and-desist order?

FOX 10 learned the facility is no longer operating as Thomas Suites since earlier this year.

The investigation is complete, but we’re told court proceedings in this case are ongoing as entities like Thomas Suites has the right to appeal any enforcement action taken against them for due process.

We’ve reached out to Demasi and his attorneys for comment, and have not heard back.

FOX 10 Investigator Justin Lum asked Jeffrey if he would call this a large-scale halfway house.

He answered, "It was essentially a large-scale halfway house that promised a lot of services but was allowing people to do drugs. There was crime, drug dealing, no running water, no fire sprinklers."