Menu Close

The California Attorney General in partnership with the U.S. Department of Justice, announced a settlement with the owner of one of California’s largest chains of pain management clinics over allegations that he defrauded Medi-Cal and Medicare of millions of dollars.

Dr. Francis Lagattuta and his business, Lags Spine & Sportscare Medical Centers Inc (Lags Medical Clinics), which ran more than 20 facilities in California’s Central Valley and Central Coast, carried out medically unnecessary tests and procedures on thousands of patients, and billed Medi-Cal and Medicare for these services over the course of more than five years.

The settlement totals nearly $11.4 million. The funds were allocated in proportion to losses faced due to the alleged fraud scheme. The United States will receive around $8.5 million, California will receive over $2.7 million, and Oregon will receive over $130,000. Dr. Lagattuta will also be barred for five years from serving any Medi-Cal beneficiaries, billing for services to any Medi-Cal beneficiary, or receiving reimbursement for any services provided to any Medi-Cal beneficiary.

The settlement amount of $11,388,887 is based on Lagattuta’s and Lags Medical’s ability to pay and includes proceeds from Lagattuta’s sale of a remotely operated underwater vehicle.

The settlement resolves allegations that, from 2018 to 2021, Lagattuta and Lags Medical performed medically unnecessary surgeries to implant spinal cord stimulators, which is an invasive surgery of last resort for the treatment of chronic pain. Lagattuta paid a psychiatrist to state to Medicare and Medicaid insurers that the psychiatrist had performed a necessary psychological evaluation on each patient prior to receiving the surgery and that the patient did not have any preexisting psychological or active substance abuse disorders that would adversely affect their response to the surgery. But Lagattuta and Lags Medical knew that the psychiatrist did not perform in-person psychological evaluations of any patients and ignored indications that many patients suffered from psychological or substance use disorders before receiving spinal cord stimulation surgery.

Lagattuta and Lags Medical also allegedly performed medically unnecessary skin biopsies to test patients for small fiber neuropathy. As part of the settlement, Lagattuta and Lags Medical acknowledged that Lagattuta created what he named an “Artificial Intelligence Team” of non-provider staff who were required to order at least 150 skin biopsies per week for patients without the consent of the patients’ treating providers at Lags Medical. Each biopsy order stated that the patient had identical symptoms of small fiber neuropathy, yet those symptoms were generally inconsistent with those patients’ actual symptoms. Lagattuta and Lags Medical also acknowledged as part of this settlement that, if a patient refused a skin biopsy, Lags Medical told the patient that they would reduce their opioid medication and instructed the patient’s provider to immediately taper the patient’s medication

Finally, the settlement resolves allegations that Lagattuta and Lags Medical performed medically unnecessary definitive urine drug testing, which identifies the concentration of specific medications, illicit substances, and metabolites in urine samples. Blanket orders of urine drug testing – identical orders for all patients without regtard to each patient’s individualized medical necessity for the test – are not covered by Medicare. Lagattuta and Lags Medical acknowledged that they made identical orders of urine drug tests for all patients to be tested every four months and ordered the maximum number of drug panels for each patient, using Healthcare Common Procedure Coding System Code G0483. Lags Medical’s CEO stated to Lagattuta that performing urine drug tests on all their patients “[s]hould be a big money maker” and called it “Operation GO483!” When a new consultant for Lags Medical told Lagattuta that it was “medically unnecessary but also wasteful” to order the maximum number of drug panels for each patient, Lagattuta directed a Lags Medical executive not to contact the consultant “because she might report us. For anything.”

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Steven Capeder, Lags Medical’s former operations director and marketing director. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned United States and California ex rel. Steven Capeder v. Francis P. Lagattuta, M.D., Lagz Corporation, Spine & Pain Treatment Medical Center of Santa Barbara, Inc., and LAGS Spine & Sportscare Medical Centers, Inc., No. 2:18-cv-2928 KJM KJN (E.D. Cal.).

As part of the settlement Capeder will receive approximately $2.1 million whistleblower fee.

On May 19, 2021, he California Department of Health Care Services (DHCS) temporarily suspended select Lags Medical Centers locations from participation in the Medi-Cal program because of an ongoing investigation by the California Department of Justice (DOJ), Division of Medi-Cal Fraud and Elder Abuse, involving allegations of fraudulent billing and potential patient harm.

On May 25, 2021, DHCS learned that Lags Medical Centers voluntarily closed 29 California locations even though DHCS only suspended seven National Provider Identifier numbers associated with up to 17 locations, potentially impacting about 20,000 beneficiaries access to pain management care.

The Los Angeles Times published a comprehensive report on the abrupt closure of the Lags Clinics.