Prince George's County officials said yesterday that a $10 million deficit the county's public hospital system accumulated in fiscal 1985 could have been a "paper loss" created through auditing techniques.

Officials of Community Hospital and Health Care Systems Inc. (CHHCS), the corporation that runs the county's three public health facilities, released figures Tuesday indicating that it suffered a loss of nearly $7 million more than had last been publicly estimated.

That loss, said Corbett A. Price, district vice president of Hospital Corp. of America (HCA), was caused by increased expenses and a decline in the number of patients during the fiscal year that ended in June.

Officials of HCA, the firm hired to manage the facilities, estimated in August that the loss was $3.5 million, although they privately told county officials in September that the deficit would be between $6 million and $8 million.

County Attorney Thomas Smith said he was baffled by the figures and did not understand how a system that was $9 million in the black when the county leased it to CHHCS in 1983 could have plunged so far into debt so fast.

"If the system really had lost $10 million in two years, they'd be in bankruptcy," Smith said.

County Chief Administrative Officer John Wesley said the auditing procedures used by HCA reflect "prudent, conservative" accounting practices because the auditors allowed for a $12 million increase in the amount written off for contractual adjustments and bad debts.

Both Smith and Wesley said the deficit may be a "paper loss."

Price said yesterday that no figures were juggled in coming up with the results released this week. "It's not creative accounting if that's what you're asking," Price said.

"There was consistency in terms of the accounting methodology [used]" in 1984 and 1985, he said.

On two occasions in recent months, the county government has used its influence as lessor of Prince George's General Hospital, Greater Laurel-Beltsville Hospital and the Bowie Health Center to help extract CHHCS from a series of management problems.

The provision for uncollectible accounts -- bad debts written off for accounting purposes -- rose to about $20 million in fiscal 1985, according to the statement.

The 1985 net loss, including nonoperating income, was about $6.6 million, compared with $11,000 in 1984, the statement said.

"Somebody's loading every expense in the world into the past year," Smith said. "They [HCA] want to look good. Nothing wrong with that."