The D.C. Department of Human Services yesterday withdrew D.C. Village, the city's home for the aged, from the federal Medicaid program, in the face of a probable cutoff of Medicaid funding because of the severe understaffing at the facility.

Human Services Director James Buford said the city took the action to head off a federal certification inspection that city officials have determined the facility could not pass.

D.C. Village is the second city-run facility to fall below Medicaid staffing standards. Forest Haven, the city's home for the mentally retarded, lost its accreditation last August following a federal inspection and has yet to regain it, meaning the city must absorb the cost of $6 million in annual Medicaid payments there until the facility is reaccredited.

The action announced yesterday at D.C. Village is actually a bureaucratic maneuver designed to avoid a prolonged loss of about $4 million in Medicaid funds now spent at D.C. Village.

Although there are 399 beds at the facility, there is only adequate staff to cover the 285 beds. Buford said yesterday that in order to avoid decertification, the city government will withdraw the entire 399-bed facility from Medicaid coverage and then reapply for Medicaid eligibility by April 10 as a 285-bed facility with adequate staff. Federal officials said yesterday they would endorse such a move.

The remaining beds, in a separate housing unit at the same sprawling facility in Southwest Washington near the Blue Plains Sewage Treatment Plant, would continue to operate understaffed with funds from the city government. Buford said the city hopes to phase in sufficient staff to bring the smaller facility into Medicaid compliance by July.

There are currently 64 vacancies -- about half of them nurses -- at D.C. Village, according to its executive director, David Schwartz.

Buford said that while the facility is still understaffed, there will be no changes or cutbacks in the routine services provided there. "The fact that we do not meet staffing patterns does not mean people are not cared for," Buford said. "The difficulty is in not having sufficient staff."

Although the move to withdraw from the program to avert a funds cutoff was an unusual one, it has the approval of the federal officials who disburse the Medicaid money. Dr. Gerald Szucs, regional director of the Health Standards and Quality Bureau of the U.S. Department of Health and Human Services regional office in Philadelphia, said "As a strategy, it is allowable and one we would endorse. It's legit."

One community group, which has closely monitored D.C. Village and been increasingly critical of understaffing there, said the city should have moved to correct the personnel shortages before the threat of a Medicaid cutoff.

"Why did they get to the point where they are now," said Rose Alford, chairperson of the executive board of the Southeast Vicariate Cluster, a collection of 13 churches in the area around D.C. Village.

"People sit around for 16 hours a day because there is no one to walk them," Alford said. She said that there is insufficient staff for feeding patients on time, for cleaning rooms and for providing timely laundry service.

Buford blamed the understaffing on the city's residency requirement, a law that requires new city government employes to live inside the District of Columbia. Mayor Marion Barry has consistently complained that the residency law has hampered the recruitment of health care specialists and data processors to run the city's computers.

Not until last month, after several unsuccessful attempts, did Barry succeed at prodding the City Council into giving him the power to grant exemptions to the residency law for filling critical vacancies at D.C. Village and other understaffed city facilities. Not enough persons have been hired in the time since to solve the problem at D.C. Village, Buford said.