Dignity Health, a hospital chain that operates in three states but is based in San Francisco, will be paying $37 million as settlement to the government for alleged overbilling under the Medicare and military health care program.

The malpractice has been going on for years, with Dignity, formerly named Catholic Healthcare West, submitting medical bills for inpatient care at 13 of the 39 hospitals where it operates in Arizona, Nevada and California.

The bills, as found by the Justice Department, should have been charged with outpatient rates, which are less expensive than the inpatient rates that the hospital charged on the medical bills.

The medical bills include elective cardiovascular surgery procedures for pacemakers and stents, along with diagnostic tests at the 13 violating hospitals from the years 2006 to 2010. The overpriced bills also include kyphoplasty, a form of operation on the spine, from four of the 13 hospitals from the years 2000 to 2008.

The medical bills were then paid by the Medicare program and Tricare, a military health program.

The case against Dignity was brought to light as Kathleen Hawkins, a former employee of Dignity, stepped forward to reveal the company's malpractice.

Hawkins filed a lawsuit in San Francisco that revealed the irregularities used by Dignity in its billing system. As a result of the decision by the Justice Department, Hawkins will be receiving $6.25 million from the $37 million that Dignity will have to pay.

According to the chief of the inspector general's office of the U.S. Health and Human Services Department, Ivan Negroni, all hospitals that will be found trying to boost its profits through admitting and charging patients for overpriced and unneeded inpatient treatment will be prosecuted.

Dignity, which is among the top five biggest hospital systems in the country, said that its settlement was not an admission of any wrongdoing. The settlement is being paid by the company only to be able to avoid additional expenses that will be incurred if the litigation extends.

According to a statement made by the company, the disputes in Dignity's billing system only reflects the general confusion that companies operating in the health care sector are experiencing, due to the unclear standards by the government in the approval of coverage for admissions of patients.

The company added that, as a result of this confusion, physicians have found it challenging to make sure that the documents that they file are accurate representations of the decisions they make when it comes to their findings on specific patients.