The health care provider denied any wrongdoing and cited a problem with a computer glitch by the state for the overpayments.
The settlement, announced by Attorney General Samuel S. Olens, requires the hospital system to pay a lump sum $2.717 million to the state Department of Community Health to settle all possible claims related to the excessive Medicaid overbilling and reimbursements.
The health care provider agreed to pay an additional $2,500 to defray costs of the 11-month investigation.
The hospitals cooperated fully with the state's investigation and implemented corrective actions to ensure similar billing problems do not happen again, the state said.
The probe focused on "cross-over'' claims made for patients who are enrolled in both Medicare and Medicaid.
The investigation found the hospital providers filed claims that did not reflect the full amount of Medicare prior payments, which allowed the providers to receive excessive Medicaid reimbursements.