Menu Close

Last spring, Lags Medical Centers, a sprawling chain of pain clinics serving more than 20,000 patients in California, abruptly shuttered amid a cloaked state investigation into “credible allegations of fraud.” Tens of thousands of patients were left scrambling for care, most of them low-income Californians covered by state and federal insurance programs. Many have struggled for access to their medical records and to find doctors who would renew long-standing opioid prescriptions.

According to the Los Angeles Times, report, the closures came on the same day that the California Department of Health Care Services suspended state Medi-Cal reimbursements to 17 of Lags Medical’s 28 locations, citing without detail “potential harm to patients” and an ongoing investigation by the state Department of Justice into “credible allegations of fraud.”

In the months since, the state has declined to elaborate on the concerns that prompted its investigation. Patients are still in the dark about what happened with their care and to their bodies.

Even as the government remains largely silent about its investigation, interviews with former Lags Medical patients and employees, as well as Kaiser Health News analyses of reams of Medicare and Medi-Cal billing data and other court and government documents, suggest the clinics operated based on a markedly high-volume and unorthodox approach to pain management. This includes regularly performing skin biopsies that industry experts describe as out of the norm for pain specialists, as well as notably high rates of other sometimes painful procedures, including nerve ablations and high-end urine tests that screen for an extensive list of drugs.

Those procedures generated millions of dollars in insurer payments in recent years for Lags Medical Centers, an affiliated network of clinics under the ownership of Dr. Francis P. Lagattuta. The clinics’ patients primarily were insured by Medicare, the federally funded program for seniors and people with disabilities, or Medi-Cal, California’s Medicaid program for low-income residents.

Taken individually, the fees for each procedure are not eye-popping. But when performed at high volume, they add up to millions of dollars. Take, for example, the punch biopsy, a medical procedure in which a circular blade is used to extract a sample of deep skin tissue the size of a pencil eraser. The technique is commonly used in dermatology to diagnose skin cancer but has limited use in pain management medicine, usually involving a referral to neurologists, according to multiple experts interviewed. These experts said it would be unusual to use the procedure as part of routine pain management.

Lags Medical clinics performed more than 22,000 punch biopsies on Medi-Cal patients from 2016 through 2019, according to state data. Medi-Cal reimbursement rates for punch biopsies changed over time. In 2019 the state’s reimbursement rate was more than $200 for a set of three biopsies performed on patients in fee-for-service plans.

Laboratory analysis of punch biopsies was worth far more. Lags Medical clinics sent biopsies to a Lags-affiliated lab co-located at a clinic in Santa Maria, according to medical records and employee interviews. From 2016 through 2019, Lags Medical clinics and providers performed tens of thousands of pathology services associated with the preparation and examination of tissue samples from Medi-Cal patients, according to state records. The services would have been worth an estimated $3.9 million using Medi-Cal’s average fee-for-service rates during that period.

In that same period, Medicare reimbursed Lagattuta at least $5.7 million for pathology activities using those same billing codes, federal data show.

Much of the work at Lags Medical was performed by a relatively small number of nurse practitioners and physician assistants, each juggling dozens of patients a day with sporadic, often remote supervision by the medical doctors affiliated with the clinics, according to interviews with former employees. Lagattuta himself lived in Florida for more than a year while serving as medical director, according to testimony he provided as part of an ongoing malpractice lawsuit that names Lagattuta, Lags Medical, and a former employee as defendants.

A lawsuit, filed in Fresno County Superior Court, accuses a Lags Medical provider in Fresno of puncturing a patient’s lung during a botched injection for back pain. Lagattuta and the other named defendants have denied the incident was due to negligent treatment, saying, in part, the patient consented to the procedure knowing it carried risks.

Former employees said they were given bonuses if they treated more than 32 patients in a day, a strategy Lagattuta confirmed in his deposition in the malpractice lawsuit. “If they saw over, like, 32 patients, they would get, like, $10 a patient,” Lagattuta testified.