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Sea Mar Community Health Centers, which provides health services to mostly poor and many minority residents in 10 counties, has agreed to pay $3.65 million to settle an investigation by the state Attorney General’s Office into improper Medicaid billings.

Attorney General Bob Ferguson said the 2½-year investigation revealed the health-care provider overbilled Medicaid for thousands of dental appointments, according to a news release.

Ferguson said his office’s false-claims unit raised concerns over the billings, which occurred between 2010 and 2014, and involved routine anti-cavity fluoride treatments.

The AG’s office alleged that the fluoride treatments, which could have been performed by dental assistants as part of a patient’s regular six-month checkups, were instead billed at a higher rate as stand-alone appointments with a dentist or hygienist.

If performed by a dental assistant on a fee-for-service basis, a fluoride treatment should cost between $13.25 for most adults and $23.41 for younger children.

However, treatments at Sea Mar were billed as “encounters” with a dentist or a hygienist, which typically cost $180.

Medicaid rules state that in order to bill for an encounter fee, the procedure must require the skills of a dentist or dental hygienist to warrant the higher cost.

The AG also alleged that Sea Mar billed for more dental appointments per patient than Medicaid allows.

“Without exception, providers who participate in our state’s Medicaid program must accurately bill for and document services provided,” Ferguson said in a statement. “I’m pleased my office was able to recover the excess taxpayer funds that went out the door so this money can go back into health care for those in need.”

The agreement also resolves a pending lawsuit filed by Sea Mar in U.S. District Court in June against Ferguson, Dorothy Teeter, the director of the Washington State Health Care Authority, and Kevin Quigley, the secretary of the state Department of Social and Health Services. The company sued after Ferguson’s office demanded it pay $72 million, most of it in fines and penalties for roughly $7.3 million the AG alleged the company had overbilled more than a decade.

Mike Leong, chief counsel for Sea Mar, said that in the end the two sides agreed to settle for half the $7.3 million figure.

The state received $3.35 million, Ferguson’s office said. An additional amount was awarded to a whistle-blower in the case, said AG spokeswoman Brionna Aho.

Leong said the AG’s allegations surprised the company, which had been billing fluoride treatments as encounters for years and that the state knew it from prior inspections.

“Our dental billing procedures have been in place for more than a decade and despite multiple audits, the state had never before identified or notified Sea Mar of unlawful practices related to its billings,” Leong said. “Sea Mar rejects, in the strongest terms, any allegations of wrongdoing.”

Ferguson said Sea Mar cooperated with the investigation.

According to its website, Sea Mar expanded from a single clinic in the South Park neighborhood of Seattle in 1978 to a chain of 20 medical clinics, 13 dental clinics and 16 behavioral-health and substance-abuse clinics in 10 Washington counties — including the state’s only inpatient Spanish-only behavioral-health clinic.

In 2010, Sea Mar said it provided health services to 143,735 Washington residents, 90 percent of whom have incomes below the federal poverty line. Sea Mar says 40 percent of its clients are Latinos.

Mike Carter: or 206-464-3706