A Southwest Washington center has ended its day treatment program for 150 retarded and mentally disturbed patients after losing its government funding following findings of impropriety.

The Metropolitan Care Center was dropped from the city's Medicaid program last month after District investigators found it had submitted false billings, allowed medicine to be administered by unqualified help and misrepresented the professional credentials of staff members, according to city records.

The center, which ended its day treatment program Monday, billed the city for at least $17,118 in psychiatric services before a psychiatrist was hired and repeatedly submitted double bills and false claims, investigators said. The city eventually recovered the $17,118.

The center's patients live at St. Elizabeths Hospital or in private group homes. New day treatment programs have been found for some residents and others are awaiting placement, said Lee Partridge, director of the District's Health Care Financing Administration.

Partridge's office dropped the center from the Medicaid program in September 1984, but appeals delayed the action until June 25.

The center, which opened in August 1983, is owned by Benjamin and Barbara Lofton of Upper Marlboro. Benjamin Lofton said yesterday that they are appealing the city's action, which was upheld last month by the D.C. Board of Appeals and Review. A separate walk-in medical clinic at the center, at 25 M St. SW, continues to operate.

Lofton, a former federal equal employment opportunity officer, said the center was the couple's first venture into health care. "We never said we were clean as snow, that we did not make mistakes," Lofton said of the city's action. "But the board was slanted."

The city, which paid the center $31 per day per resident, found in its investigation that the staff referred to program director Barbara Lofton as "Doctor" and that a resume in her files listed a PhD in clinical psychology from Catholic University.

According to city records, investigators found that she never earned a degree from Catholic University and was not licensed as a clinical psychologist. In its termination action, the city cited her for acting as program manager without being a mental health professional, as required by District regulations.

The appeals board found that Barbara Lofton did not use the resume in applying for Medicaid certification in 1983, and found that District officials failed to ask for her credentials when she applied.

In 14 days of hearings in 1985 and 1986 before the board, Lofton admitted "that for some indeterminate time, it had been her practice to prepare and distribute resumes or vitae with false credentials on them. She admitted to maintaining a file of such 'fantasy' resumes at her office," the three-member board concluded. "We find she knowingly and willfully misrepresented her professional credentials," the board wrote.

Inga Watkins, an attorney for Barbara Lofton, noted that the certification "has nothing to do with something on a resume." Watkins told the city in 1984 that Lofton had a PhD from Pacific Western University, an unaccredited institution that states its degrees should not be used for professional certification.

Watkins also said that Barbara Lofton was not the center's program manager, but its administrator.

The city also said a staff member who was not licensed as a nurse in the District administered insulin and psychotropic medicine, in violation of District law. The woman, a certified nurse in England, was later moved to the center's records department. Benjamin Lofton described the medicine as "self-administered."

The city board detailed the cases of four patients in which the city was charged for treatments that were not given or were billed for twice.

Benjamin Lofton disputed many of the charges. He said that the improper billing for psychiatric services occurred because of confusing billing directions from the city Medicaid office. "We back-billed from 1 August instead of 15 August 1983 ," he said. "Now we remember" that the psychiatrist was not hired until August 17, he said.