A federal inspection held in February at the Washington Nursing Facility concluded that nursing care was so bad that the 300-bed nursing home should be dropped from the Medicare program.

Federal inspectors found that 40 incontinent patients did not receive enough help, patients' medicines were not labeled properly, equipment was not clean, and "the number and scope" of deficiencies showed that the nursing director had not fulfilled her duties.

According to documents released to The Washington Post under the Freedom of Information Act, a survey by District inspectors in early April also found the nursing care was deficient at the Southeast Washington home. Two other serious problems, plus deficiencies in its Medicaid program, were found.

Despite the federal government's request that federal payments to the home be stopped "immediately," the District licensing agency has not yet typed up its report or recommended that the home be dropped from either federal program.

The federal government does not end a home's payments for Medicare patients until it receives that recommendation from the state agency that certifies homes for the program, said Claudette Campbell, chief of the review section for the regional office of the U.S. Health Care Financing Administration. She said the penalty is imposed only in cases of serious problems and is rarely used.

"We do have delays in typing up reports because of the number of reports we have," said Frances Bowie, director of the city's Service Facility Regulation Administration, which licenses nursing homes. "We have given priority to this report and are reviewing it."

This is not the first problem that inspectors have had with the two-year-old facility. The home has a short-term Medicare contract because of deficiencies found by District inspectors in the last two years. In the 1984 inspection, a report of which was just released publicly, inspectors found that some patients were bathed between 3 a.m. and 4 a.m. and others awakened three hours before their 8 a.m. breakfast.

They also found that some residents wore hospital gowns all day and that aides used paper towels instead of diapers, or left residents wet, because of shortages of supplies. In its plan of correction, the home said that supplies were increased and that patients will not be awakened for care. Medical, nursing and sanitation problems also were addressed in the plan of correction.

Inspectors found one patient's record contained the complaint, "My hands haven't been washed since I been here." Home aides have written, "Both hands very dirty -- left hand had rolls of matted dirt with breakdown of this paralyzed patient. Both hands had a very fowl sic odor." The home told the city it would hold special training for its nursing staff to correct such problems.

The home's newly hired administrator, Gail Walsh, said, "We feel substantial strides have been made. We're well on the way to dispelling past deficiencies."

In a related matter, the home's insurance company made an out-of-court settlement Monday with Sallie Petty, an 82-year-old resident of the home who received third-degree burns when left under a heat lamp in January. Petty, who cannot move freely because of an amputated right foot, required two skin grafts as a result of the burn. She sued the home last month for $350,000. Her attorney said he would not disclose the settlement amount.

A report filled out by a nurse at the home said Petty was given heat treatment for a bedsore. According to the report, after Petty had spent 10 minutes under the lamp, a staff member checked and discovered Petty's skin was blistered.

The report said that neither the home's physician nor the medical director said hospitalization was required. Petty later was admitted to a hospital and underwent surgery.

The city licensing agency was not notified of the incident, according to Judy McPherson, who directs the health section of the city's licensure program. She said she learned of the incident by a reporter's inquiry and that federal and District law require that serious incidents be reported to the city.

"It's hard to figure out," McPherson said. "The administrator who was there isn't there now. We don't know why he didn't notify us."

"The only thing I can do is write to them and say you ought to notify us," said McPherson.

Daniel Cohen, of Philadelphia, an attorney for HBA Management, a Fort Lauderdale firm that manages the nursing home for its owners, said of Petty's case, "An incident of that sort is unfortunate and speaks for itself."

According to court records, the home is owned by a limited partnership involving two general partners, Philip R. Miller of Potomac and Stephen Lazovitz of Hollywood, Fla. They could not be reached for comment.

Walsh, the home's administrator, explained why D.C. inspectors found nursing care deficiencies one month after the federal inspectors did. She said, "Sometimes it takes longer than 60 days to fix things up. We have a very large business here. Sometimes it isn't an overnight thing."

Under federal law, a nursing home cannot participate in the Medicare program if a "condition" of participation, such as nursing care, is not met. The federal inspection in February found that condition was not met and District inspectors found three conditions unmet during its April inspection, according to federal documents.

Campbell said the home can continue to operate while the paper work is being assembled.

Campbell said, "Their problems are quite serious and significant, but don't pose an immediate threat."