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Last year, Alvarado Hospital was purchased by Prime Healthcare Services, a group with a reputation of turning around hospitals facing financial troubles.

It was soon after that the new owner showed up to speak with doctors and other employees.

Former Alvarado Hospital employee Anneke Doty knew there would be changes after a meeting with Prime Healthcare owner Dr. Prem Reddy.

"It was very much 'there's a new sheriff in town,'" said Doty.

Doty's job as a medical coder was to prepare summaries of patient illnesses for Medicare reimbursement. She said she was troubled when the new owner told staff doctors at Alvarado how to diagnose patients.

"There [were] several diagnoses that he was suggesting, highly recommending. They were told they should look for those opportunities whenever possible," Doty said.

It turns out that many diseases share similar symptoms, but more severe diseases are reimbursed by Medicare at higher rates.

Doty said, "He [Reddy] encouraged the physicians to stop documenting syncope, which is fainting or a dizzy spell, and instead use the term 'autonomic nerve dysfunction,' which reimburses at a higher rate."

Medicare, which is paid for by taxpayers, pays a hospital about $7,000 to treat a patient who has fainted, even if there are other medical complications. But a patient with a nerve disorder and a major complication can net a hospital $12,500.

"He made the comment that autonomic nerve dysfunction is such a vague description that no one could ever question the use of that code in the medical record," said Doty.

After hearing that, Doty said what ran through her mind was, "This is crazy. How can I get out of here?"

Prime Healthcare officials refused to do an on-camera interview, but they denied any wrongdoing and would not respond to allegations made by former employees, according to California Watch.

California Watch analyzed state Medicare date for 2010 and found that out of 468 cases of autonomic nerve disorder, 360 were reported by Prime-owned hospitals -- 90 times more often than the average California hospital.

Dr. Geoffrey Sheean, a neurology professor at UC San Diego, said, "Very surprising, and it rather does suggest that they're applying a very liberal definition, or very liberal criteria, to what they consider an autonomic nervous system disorder."

Sheean, a leading nerve disorder specialist, said the condition is extremely rare.

"I've only seen two cases in the last 13 years," added Sheean.

California Watch found that Prime also reports unusually high rates of malignant hypertension and severe malnutrition -- ailments that can also next extra payment.

Officials from Kaiser Permanente, which insures millions of Californians, say when its patients land in Prime hospitals, they receive inflated bills. Kaiser is suing Prime for "fraudulent billing practices" and "overstating patients' conditions."

Prime has denied the allegations.

Sheean said if patients receive an exaggerated diagnosis, it could negatively affect their treatment.

"It does have real patient care consequences, and that's the more disturbing part to me," said Sheean.