A Baltimore grand jury is investigating allegations of Medicaid fraud involving Dr. Leon R. Levitsky, a physician whose commercial ventures have included Prince George's Doctors' Hospital in Lanham, an adjacent nursing home, Texas oil wells, British inns, an auto body repair shop and a trash can company.

The investigation, according to court papers filed in connection with subpoenas issued to others, is focusing on whether Levitsky and Dr. William R. Greco, his longtime business partner, included personal expenses in their nursing home's claims for Medicaid reimbursement. The grand jury also is looking at the affairs of the hospital, according to the court papers.

State records show that from 1975 to 1980, the years under review, the nursing home more than quadrupled its Medicaid reimbursements, receiving a total of $1,227,690 in payments. In that same five-year period, records show the hospital received $4.3 million in Medicaid reimbursements.

The Maryland attorney general's Medicaid fraud unit initiated the investigation more than two years ago. Since last June, more than a dozen motions to quash subpoenas and responsive pleadings have been filed in the investigation. The grand jury investigation began in August.

A central figure in the investigation is Leon Robert Levitsky, president and chairman of the board of the hospital and medical director of the nursing home. According to state records and papers filed in civil suits, he and Greco own the nursing home and when the hospital opened the two of them together held 60 percent of its stock. Greco is listed in state records as secretary of the hospital and president of the nursing home. Neither Levitsky nor Greco returned telephone calls last week seeking comment on the investigation.

During a brief conversation in 1979, in his plain, wood-paneled storefront office in Mount Rainier where he has had a family practice since 1955, Levitsky said, "I don't see myself as an interesting person. I'm a man of simple needs."

He is also a man of many public roles with a penchant for privacy. Levitsky has refused to tell the state's hospital cost regulatory commission what the 230-bed hospital charges in several departments that the hospital franchises. At the same time, in a 1980 lawsuit the hospital charged the commission with violating the state "sunshine law" by allegedly conducting its business in closed meetings.

The doctor also wields not a little clout in county and state Democratic Party politics, and he sits on the governing board of the Southern Maryland Health Systems Agency, which has the power of approval or disapproval over some activities of health care facilities in the four-county region. A past president of the Prince George's Medical Society, Levitsky refuses to allow his portrait to hang with others who have led the group on the wall of the society's office in Lanham.

While Levitsky shuns publicity, there is much about him that can be gleaned from the cumulative public record of many lawsuits and other proceedings involving the hospital and nursing home.

Levitsky, 55, at once doctor-businessman-politician, graduated with honors from a small college in Pennsylvania, attended George Washington University medical school and interned for one year at a Philadelphia hospital--the minimum requirement for a doctor. But, by his own account in a 1977 deposition, he did no hospital residency, the usual next step up the professional ladder for most physicians.

He and his wife, Carol, who is a lawyer, and their three children, live in a modest brick colonial house in College Park. They own two Cadillacs and two Mercedes, according to state records, and during the period under investigation, he also drove a third Cadillac, a blue Eldorado convertible leased by his nursing home from Bob Banning, a car dealer and a director and stockholder in the hospital.

In an interview with The Washington Post in 1979, Levitsky's business partner, Greco, said, "He's a tough businessman. That's where people get rubbed. He's a fighter, an extension of a lot of people's ego in a way. He does the things you wish you could do. He fights the system."

In the earlier interview, Greco credited Levitsky with helping him get a start in medicine by renting him inexpensive office space and sending him patients when Greco had "three children, a pregnant wife and no means."

In 1962, the friendship blossomed into a business partnership that bought land for development along Good Luck Road, just outside the Beltway in Lanham. Two years later on that site, they built the 104-bed Magnolia Gardens Nursing Home, "for the young at heart."

In 1966, according to court papers, their wives--using maiden names--and a third woman who had decorated the nursing home and used her married name, formed Prince George's Medical Equipment Co. According to documents filed in court, Magnolia sold its wheelchairs and similar hardware to the firm, which then leased them back to the nursing home--a tax advantage to both parties.

There was never any written contract. "Our handshake is our bond," Levitsky said in court papers.

The government charged in civil suits it initiated in federal court in 1974 and 1978 that the nursing home had received Medicare overpayments and that the home and the equipment firm had carried out a double-billing scheme in a "conspiracy to defraud" the federal government of Medicare funds. All of the defendants denied the charges. The government alleged that between 1969 and 1971 the nursing home submitted claims for use of the equipment to one Medicare insurance intermediary while the equipment firm had submitted claims for use of its equipment to a different Medicare intermediary.

The government charged that Levitsky "actively participated" in managing the wives' firm, which used his Mount Rainier medical office rent-free. The government alleged in court papers they used their maiden names in the equipment firm to conceal their relationships with their husbands and the nursing home.

"The only relationship we happened to have was the fact we happened to be married to them," Levitsky said in court papers. His wife, he said, used her maiden name not to hide anything but because she "was a women's libber before that word got around." In an affidavit, she said she was admitted to the D.C. Bar under her married name but used her maiden name (Rajoppi) "for certain financial purposes."

In June 1978, the 1974 lawsuit was settled for $19,500 without a finding of fault. Regarding the other lawsuit, on May 18, 1980, lawyers for the nursing home and the Justice Department agreed to send part of the Medicare dispute to a special federal examiner. That dispute, which by then involved $44,320 in alleged overpayments made to Magnolia apart from the alleged double-billing, is still pending. As part of the 1980 agreement, the government withdrew its allegations of double billing.

Meanwhile, in December 1978, Levitsky's nursing home sued the government for legal and accounting fees it contended it spent as a result of its participation in the Medicare program. A federal judge ordered the government to pay Magnolia $42,000. After the home sought $5,160 more, the judge reversed himself, relying in part on the fact that it was unclear how much of the award related to Magnolia's defense against the charges of Medicare fraud and overpayment.

Work on the $5.5 million hospital, behind the nursing home, began in 1973. Levitsky, the project's self-styled "chief honcho," owned 40 percent and Greco owned 20 percent of the venture; 28 others, most of them physicians who practice there, acquired the rest.

As the work proceeded, Levitsky dealt directly with several subcontractors. This led to a dispute with the general contractor, who normally hires and pays the subcontractors, and a breach of contract judgment against Levitsky and the other hospital stockholders for $210,000.

Among the subcontractors with whom Levitsky dealt directly were Virginia steel and electrical firms headed by William McAteer, a hospital director and stockholder. Before the job was done, according to McAteer, Levitsky owned stock in one of McAteer's companies and had invested with him in two English inns.

Steel for the hospital came from McAteer's Cheshire Co. in England to his Continental Steel in Virginia. In 1978, the government charged that Continental conspired with Cheshire to "import merchandise by means of false and fraudulent invoices," saving Continental thousands in duty on the hospital job. In 1979, McAteer entered a guilty plea on behalf of Continental to customs fraud in connection with the construction of Doctors' and the company paid a $10,000 fine.

In the midst of this litigation, in December 1975, the directors and shareholders of Doctors' amended their articles of incorporation to indemnify themselves against all legal expenses, judgments, fines and settlements in civil and criminal cases--win or lose--where they "reasonably believed" their conduct to be lawful or proper.

To pay the $210,000 judgment in 1979 against Levitsky and other shareholders, the hospital tried to raise its patient charges, but the state cost review commission said no.

After the hospital opened in 1975, it effectively removed itself from complete review by the state's health cost commission by franchising seven departments, including the laboratory, blood bank, respiratory therapy, nuclear medicine and radiology. The hospital has repeatedly refused to provide the commission with financial data about these departments, including patient charges. These departments normally account for about 30 percent of a hospital's revenues. According to the commission's chief rate analyst, some Maryland hospitals until recently had franchished single departments whose finances they refused to report. He said Doctors' Hospital is the only one that now franchises any departments.

In part because of what the commission has found to be the hospital's continuing refusal to comply with its reporting requirements, that panel has repeatedly refused the hospital's requests for rate increases. Smaller interim increases have been granted, on at least one occasion under court order obtained by the hospital. Negotiations to reach an agreement on rates recently failed, so the last request, for a 25.53 percent raise, is scheduled to come before the commission next month.

By a conservative calculation, the commission staff said in a 1981 report prepared in response to the last rate request, Doctors' charges 47 percent more per patient than comparable hospitals throughout the state and 40 percent more than others in Montgomery and Prince George's counties. Available information shows that the hospital's occupancy rate has been high, hovering around 87 percent.

Doctors' financial picture is partly obscured by a complex business structure. The hospital, which is a corporation, files public reports, but there is also a separate "joint venture," which acts as the hospital's landlord and does not file public reports. The latter, the hospital's finance director informed the commission, is "not under your jurisdiction. Such information is completely unnecessary and irrelevant to the full disclosure of the hospital's financial condition."

The commission staff has expressed concern over the hospital's contention in its most recent request for higher charges that it needs to pay $2.7 million in annual rent to the joint venture: Hospital testimony in 1980 in the court case that led to the interim rate increase showed the annual rent was $1 million less, plus inflation adjustments. The hospital has said in a letter to the commission that its claim of $2.7 million was based on "fair market rent."

The commission staff challenged the entire claim, suggesting a more proper procedure would have been to include depreciation and interest amounting to $1.1 million a year. "The end result," the staff said in its report, "is that the hospital is requesting that the commission approve in rates approximately $1.6 million in profits for lease payments to themselves."

According to reports it has filed with the commission, the hospital has sheltered some of its income in a coal mine, reducing its taxable profits, and has paid tax-deductible interest to "related" persons such as McAteer and Levitsky, who lent money to the hospital during its construction.

It also has underwritten the rental of tennis courts at the nearby Terrapin Racquet Club and a Sky Suite at the Capital Centre, for use by hospital doctors and employes.

Medicare reports for a nine-month period ending March 31, 1976, reviewed by cost commmission investigators showed that Levitsky received $60,000 for "administrative consulting." The records also showed that his wife, acting as a collection attorney, received a 30 percent commission on all unpaid bills she could collect. The hospital also spent, the Medicare worksheets showed, $550 for football tickets, $250 for hockey tickets and $550 for a trip to the Sugar Bowl.

Levitsky's political activities have included extensive contributions to county and state campaigns, some of which were made through the Doctors' Hospital Political Action Committee. In the late 1970s, that PAC endorsed eight incumbent members of the County Council on a day that the council was considering whether to allow expansion of the hospital-nursing home complex. Despite strenuous opposition from neighbors, the application was approved. Several of the council members later received campaign contributions from the committee.

Levitsky also fought to obtain kidney machines, which required the approval of the Southern Maryland Health Systems Agency, on whose governing body he sits. When the agency awarded the machines to a lower priced competitor, the hospital's lawyer appealed to the state and won. The agency appealed that ruling but voted to withdraw its appeal. Agency minutes show that while Levitsky abstained from voting, he called the question on the motion.

"As you have now discovered," Levitsky wrote in declining to be interviewed for an earlier article, "when I become involved in an effort, I do so with a maximum degree of intensity. Improving a patient's health or gaining an approval for a permit for Doctors' Hospital are both my chosen responsibilities. I approach each need with the goal of ultimate success."