The large Northern California hospital chain Dignity Health paid $37 million Thursday to the federal government to settle claims that it had been overcharging the federal Medicare program.

Dignity Health agreed to hire an independent auditor to review its Medicare claims.

In 2009, Kathleen Hawkins, who at the time was a former Dignity Health worker, filed a lawsuit against the company under the claim the company was admitting patients for expensive in-patient procedures when it should have been referring them to less expensive out-patient options for the operations.’

“Hospitals that attempt to boost profits by admitting patients for expensive and unnecessary in-patient hospital stays will be held accountable, said Health and Human Services investigator Ivan Negroni. “Both patients and taxpayers deserve to have medical decisions made solely on what is best for the patient based on medical necessity.”

Hawkins named 13 Dignity hospitals who participated in the fraud from 2006 to 2010. Four of these were further accused of overcharging for minimally invasive spinal cord compression operations.

Hawkins will receive about $6.25 million from the hospital due to the federal government’s Federal False Claims Act, which allows individuals to sue on behalf of the federal government.

Dignity claims to have decided to settle the lawsuit to avoid the expense of litigation and not out of guilt to the charges. Rather, the company says it did not understand federal standards.

Dignity Health said, “The billing disputes reflect widespread confusion in the health care industry on unclear federal standards for approving coverage of patient admissions. As a result, it is often challenging for physicians to ensure their documentation adequately reflects their decision making in order to comply with complex regulations when making their best medical judgments.”