Spiraling operating costs and fears of future cutbacks in government aid for the elderly are forcing the closing of the Baptist Home on Ward's Circle and the uprooting of its 77 elderly residents.

Resident's of the home were told last week that the facility, which American University is negotiating to buy, will close Sept. 30.

The 31 ambulatory residents have been assured of space at Thomas House, at 1330 Massachusetts Ave. NW, which the church group bought five years ago because the Ward Circle home was too small. But only about half of the 46 nursing patients now at Ward Circle can be accommodated at the Thomas House infirmary.

"We are not quite sure how the nursing patients will work out," said Letha Casazza, president of the board that controls the two institutions.

She said the decision to consolidate the two facilities was forced by mounting costs, plus fears that a major source of income -- goverment assistance to the elderly through Social Security and Medicaid -- might soon vanish.

"We're like everybody else; we're scared to death of what's going to happen to the aid programs to the elderly," she said. "We're concerned over the complete reversal of attitudes in the federal government on its responsibility for the elderly . . . . We have to effect some economies where we can."

Last year, Casazza said, the board was forced to take $225,000 from capital funds "to help meet expenses. We can't in good conscience keep raising the fees."

Some residents of the Ward Circle home were said to be distressed at the announcement of the closing. "My mother was terribly upset," Robert Barry said. "She called me in tears; everybody was in tears" when the closing was announced.

Both Barry and his mother, Bessie Butts, had high praise for the care she has received at Ward Circle. "I think you can look the world over and not find another place like this," Butts said as she rocked her wheelchair back and forth in the home's sun-splashed lounge.

Cora Peck, 84, when asked her views on the move, said briskly, "I'll make the best of it." She has no family in this area and "the friends I have left are all here," she said, indicating the retirement home, She wasn't worried about moving to the inner city facility in the heart of Washington's prostitution belt. "I don't go out at night anyhow," she said and marched off to tend to her duties as self-appointed flower-arranger for the home.

Casazza and others associated with the home acknowledge that, in retrospect, the decision to mortgage the Ward Circle home to buy the 205-apartment Thomas Circle facility five years ago was an unfortunate move. Thomas House has been operating "only slightly more than half full," said the Rev. James Langley, executive of the D.C. Baptist Convention, "and they are simply not able to meet cashflow needs on that basis."

Earlier this year, the board voted to sell Thomas House and build an addition onto the Ward Circle facility. But would-be Thomas House purchasers made their offers contingent on getting the required permission to turn it into a condominium, a process that would take more time than the Baptists had, Casazza said.

Casazza declined to identify the prospective buyer of the Ward Circle site, but a spokesman for American University, just across Massachusetts Avenue, said that "negotiations are under way" for the property.

Residents at Thomas House now pay an entrance fee of $11,000, which is earmarked for "capital expenses," Casazza said, and a monthly fee of $442 for an efficiency apartment and one meal a day. At Ward Circle, the entrance fee has been $5,000, plus $825 a month for a bedroom and three meals. Monthly fees for patients requiring more nursing care are higher. Ward Circle residents moving to Thomas House will continue to pay the same fees and receive the same services they did at at Ward Circle, Casazza said.

Casazza emphasized that neither institution has lifetime care contracts. "It does not guarantee that they can continue to live here at no expense," she said. "If they become ill and run out of money, they are going to have to apply to Medicaid," she said.

However,, the Baptist Home auxiliary, including representatives of every Baptist church in the District, is seeking to raise money to pay for the care of long-term residents who have run out of money