California Doctor and Medical Practice Agree to Pay $11.4 Million to Resolve False Claims Act Allegations Relating to Skin Biopsies, Spine Surgeries, and Urine Drug Testing

SACRAMENTO, Calif. — Lags Spine & Sportscare Medical Centers Inc. (Lags Medical) and Francis P. Lagattuta M.D., the owner and medical director of Lags Medical, have agreed to pay $11,388,887 to resolve allegations that they violated the False Claims Act by submitting millions of dollars of false claims to Medicare, Medi-Cal, and the Oregon Medicaid program for medically unnecessary skin biopsies, spinal cord stimulation surgeries, and urine drug testing, U.S. Attorney Phillip A. Talbert announced today.

Skin Biopsies

The settlement resolves allegations that, from 2016 to 2021, Lagattuta and Lags Medical 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.

Spinal Cord Stimulation Surgeries

The settlement also 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.

Urine Drug Testing

Finally, the settlement resolves allegations that, from 2017 to 2021, 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 regard 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 United States alleges that Lagattuta’s and Lags Medical’s conduct relating to these three procedures violated the False Claims Act.

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. As part of the settlement. Lagattuta has also agreed to a voluntary exclusion from federal health care programs for five years.

“Dr. Lagattuta and Lags Medical engaged in a brazen scheme to defraud Medicare and Medicaid of millions of dollars by inflicting unnecessary and painful procedures on patients whom they were supposed to be relieving of pain,” said U.S. Attorney Talbert. “The United States Attorney’s Office and our law enforcement partners will use all of the tools at our disposal to stop fraud against federal health care programs and prevent patient harm.”

“Thousands of Medi-Cal patients trusted Dr. Lagattuta to take away their pain,” said Attorney General Bonta. “Instead he exploited their trust by carrying out arrays of unnecessary tests and billing for them over the objections of the doctors he employed. Billing for services that providers know are unnecessary undermines the quality of care that patients receive, and increases the costs to the Medi-Cal program. I am grateful to the U.S. Attorney’s Office for their partnership in this effort to hold Dr. Lagattuta to account. My office remains committed to pursuing justice against those who seek to abuse the Medi-Cal system for their own benefit.”

“Health care providers, including physicians, who perform medically unnecessary procedures to boost profits undermine the public’s trust in the health care system and exploit taxpayer-funded programs,” stated Special Agent in Charge Steven J. Ryan of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “Working with our law enforcement partners, HHS-OIG is committed to protecting the health of patients and the integrity of federal health care programs serving them.”

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 announced today, Capeder will receive approximately $2.1 million.

The investigation was conducted with the California Department of Justice, the U.S. Department of Health and Human Services, Office of the Inspector General, the Federal Bureau of Investigation, and the U.S. Department of Defense, Defense Criminal Investigative Service.