Alexandria Hospital and Northern Virginia health planners are appealing a state decision denying the hospital permission to operate a dialysis unit but allowing the expansion of a nearby dialysis center.

Earlier this month, State Health Commissioner James B. Denley overruled the Health Systems Agency of Northern Virginia on both dialysis applications, only the second time in almost five years that decisions of local health planners have been overturned by the state.

In August, the local agency approvedAlexandria Hospital plans for a $350,000, eight-bed dialysis unit to open next fall. Kidney patients generally go for dialysis treatments three times a week to have their blood cleansed mechanically.

At the same time, the local health agency rejected an application from Bio-Medical Applications of Arlinton to expand its Fairfax dialysis center from 21 to 24 beds.

At the time, health planners voiced objections to Bio-Medical's controversial policy of operating a "closed" center, which requires patients to have treatment overseen by clinic doctors rather than patients' own private physicians. Federal funds pay for most of the treatments and medical fees, which can total $20,000 to $25,000 a year for each patient.

Kenley approved the Bio-Medical application despite local agency disapproval because, his letter states, the expansion of an existing center offers an "effective alternative."

He turned down the Alexandria Hospital unit because, he said, it appears that sufficient dialysis units "are currently available at an existing dialysis facility in that city" -- referring to the Northern Virginia Dialysis Center, which recently was not operating at full capacity. Local planners argue that the hospital is a regional, not just a city, hospital and that by the end of next year there will be need for additional dialysis units.

Dean Montgomery, executive director of the Northern Virginia health agency, said this week that he feels confident Kenly will reverse his decisions when, on appeal, the state does a detailed review of the applications.