Twelve Washington hospitals tentatively agreed yesterday to a cap on the amount of money they may get in Medicaid reimbursements from the District of Columbia government this year for in-patient care of indigents.

The Medicaid cap, which has been attempted by only a few other states in a variety of forms, was hailed by local hospital and city officials as a major breakthrough in efforts to rein in Medicaid hospital care costs, which soared 30 percent last year.

"We're exploring new frontiers in hospital cost containment," said James A. Buford, director of the D.C. Department of Human Services, who helped negotiate the one-year agreement with the District of Columbia Hospital Association, which represents the hospitals.

City officials have cited mounting and often unpredictable Medicaid reimbursement costs as a primary factor in the District's current financial crisis. The city is struggling to avert a projected $110 million deficit for the fiscal year that ends Sept. 30.

Under the agreement reached yesterday, a cap of $97.7 million is set on Medicaid reimbursements for in-patient care, roughly $4 million more than was spent last year. Local hospitals must absorb all costs for treating hospitalized Medicaid patients that exceed the cap.

Hospital officials expect to lose at least $2 million under the new plan, but say this is far preferable to the $11 million in losses they probably would have incurred if the city had gone ahead with an alternate proposal to impose tough new guidelines for reducing overall Medicaid costs.

Also, the hospitals are willing to gamble that they can reduce their costs and operate under the cap in exchange for the city's promise to institute a new, more dependable system for reimbursing hospitals for their costs.

Currently, a hospital must bill the city a fixed amount each time it treats a Medicaid patient and then wait, sometimes for months, to be reimbursed. The new system will estimate each hospital's costs for treating indigents and then send them partial payments twice a month, guaranteeing a steady cash flow. An audit will be conducted at the end of the year to make sure none of the hospitals was paid too much or too little.

"We believe we have developed a proposal that will have substantial benefit both to the medical patients the hospitals serve and to the institutions," said Stephen H. Lipson, executive director of the D.C. Hospital Association. "The alternative is a mish-mash of federal and District regulations."

"What this agreement means is that if the money runs out and we keep getting indigent patients, we'll continue to provide care," said Lipson.

However, Alexander Grant & Company, a management consulting firm hired by the city to review the agreement, cautioned that some hospitals might "dump" unwanted patients at D.C. General Hospital, a public facility, or cut corners to try to save money.

There are about 115,000 D.C. residents who are eligible for Medicaid benefits. Last year, about 24,000 Medicaid patients were admitted to local hospitals.

Each case ranges in cost from $2,000 to $5,000, according to hospital officials. The District pays 52 percent of total cost and the federal government pays the remainder.

In-patient hospital care accounts for more than half of the $170 million in overall Medicaid expenditures in the District. The city and federal government spend about $20 million for out-patient care and about $25 million for nursing home care. The city also spends an additional $25 million for optional services that are suggested but not required by the federal government.

Yesterday's agreement, the product of months of negotiations, is subject to review by Mayor Marion Barry and the administrators of the member hospitals.

The hospitals taking part in the agreement include George Washington University Hospital, Columbia Hospital for Women, Hadley Memorial Hospital, D.C. General, Georgetown University Hospital, Howard University Hospital, Washington Hospital Center, Providence Hospital, Hospital for Sick Children, Children's Hospital National Medical Center, Capitol Hill Hospital, and Greater Southeast Community Hospital.

Final ratification of the plan is expected, although one possible sticking point is the hospitals' request that the city increase this year's budget for a medical charities program from $1.7 million to $3.2 million. The program offers medical assistance to needy patients who do not qualify for Medicaid.

Meeting the hospitals' request would require a change in the city's already tight budget, and Barry has not indicated whether he would approve the increase.

Lee Partridge, chief of the Department of Human Service's legislative affairs office, said yesterday that the agreement lays the foundation for a long-term approach to controlling Medicaid costs without posing serious economic problems for the hospitals or disrupting medical treatment for the needy.

"I think it does something very positive for everybody," Partridge said.