D.C. City Council member John Wilson (D-Ward 2) has introduced a bill that would establish a cost review commission to regulate prices charged by District hospitals and require them to serve more indigent patients.

Under the legislation, the commission would limit the amount of money each hospital could earn and approve the "reasonableness" of rates set for hospital services.

The commission would also be able to identify patients eligible for charity care and set standards for the amount of uncompensated care that each hospital should provide annually. Hospitals providing less than a predetermined amount of uncompensated care would be required to place money in a trust fund. Hospitals exceeding the city-wide average of free care would receive funds from the trust fund based on standards set by the commission.

"The main purpose is to keep hospital costs down for all segments of the population," said Wilson, "and work out a situation where the uninsured, poor and others have the opportunity to go to a hospital with the assurance that treatment is not limited based on the money they have."

Wilson, whose legislation is patterned after a cost-containment commission operating in Maryland, said that D.C. General Hospital, the city's only public hospital, is in danger of becoming "a dumping ground for charity cases."

D.C. General provides $38 million in uncompensated care for some 5,000 patients a year, 46.5 percent of all the hospital's patients, a spokeswoman said. The city's 12 private hospitals provide about $55 million in indigent care, she said.

From June 1983 to June 1984, the average cost of a day of hospital care in the District increased by 18.7 percent -- from $499.67 to $593.26 -- compared to average daily increases of 10.7 percent in Maryland and 8.9 percent in Northern Virginia, according to a Blue Cross and Blue Shield survey. For the same period, the average length of a patient's stay decreased from 9.4 days to 8.7 days.

But representatives for local hospitals said that government involvement in setting hospital rates would hurt competition and cause them financial problems.

"It is totally unfair to tell us to restrain our charges when every vendor who supplies us is raising their fees to the ceiling," said Ben Lonto, vice president at Hadley Memorial Hospital in far Southwest. "Hospitals are nonprofit organizations by and large and we are asked to give free care but a profit company like Safeway or Giant gets full cost when a food stamp recipient comes in."

Steve Lipson, executive director of the District of Columbia Hospital Association, said through a spokesman that competition and not regulation remains the most effective strategy for containing hospital costs.

Wilson's bill is patterned after Maryland's hospital review commission, which has been operating for nearly a decade. Although a number of states are considering establishing ways to regulate hospital costs, only Maryland, New York, New Jersey and Massachusetts regulate all costs, according to Richard H. Wade, a spokesman for the Maryland Hospital Association.

Five other council members have cosponsored the commission bill, but Wilson said he expects difficulty in getting the bill passed.

"In the short run, I assume that they [hospital officials] would be opposed to this," said Wilson. "In the long run, I think the hospitals will find it to their advantage."