The loss of Capitol Hill Hospital's emergency room and other acute-care facilities will further strain the District's troubled health care system and hamper its ability to deliver medical services to the needy, hospital officials said yesterday.

The 102-year-old Capitol Hill Hospital filed a notice of intent Thursday to change from a general acute-care hospital to a specialty facility for geriatric and psychiatric patients.

"Clearly this is a time of potential chaos," said Tom Chapman, president of Greater Southeast Community Hospital, one of several hospitals expected to absorb the overflow of patients.

Chapman said the problems at Capitol Hill, combined with the rejection Thursday night of the sale of debt-ridden Hadley Memorial Hospital in Southwest Washington, represent a "double blow to the population most at risk" because both hospitals are in the eastern part of the city, "where people are most dependent on hospital care, where they don't have access to doctors and where the public health clinics don't function properly."

Hadley, which has treated residents in Ward 8 for nearly 40 years, was sold to Metropolitan Health Associates of the District for $9.2 million in June, subject to the approval of the D.C. State Health Planning and Development Agency.

But the agency denied approval because of concerns about the buyer's financial ability and management experience, said Public Health Commissioner Georges C. Benjamin.

Rejection of that sale puts Hadley "on the road to closure," Chapman said.

Officials of Medlantic Health Care Group, the nonprofit owner of Capitol Hill Hospital, said the change is necessary because of continuing losses resulting from uncompensated patient care and declining use of the hospital by paying patients. They said the hospital lost $5.1 million during the last fiscal year and could lose more than $6 million in the fiscal year that began July 1.

Hospital union members are planning a demonstration this morning at the hospital, at 700 Constitution Ave. NE, to protest the change and the loss of about 300 jobs, half hospital's work force. The new long-term care facility will require about 250 workers, a hospital spokesman said.

The change, which must be approved by the city's State Health Planning and Development Agency, could take place by the end of the year, officials said.

Phillip Schneider, spokesman for Capitol Hill Hospital, said 130 of the acute-care beds could be converted to long-term care beds by January. The psychiatric program, which would include 57 additional beds, probably wouldn't begin operating until June, he said.

Union officials said they have been notified by hospital officials that the emergency room and acute-care services would be closed in late December.

Hospital officials are watching developments at Capitol Hill with "grave concern," said Howard T. Jessamy, president of the D.C. Hospital Association.

"Capitol Hill isn't the only hospital with financial difficulties, and if it can happen to Capitol Hill it can happen to other hospitals," Jessamy said.

Jessamy said the changes at Capitol Hill will have a ripple effect on city hospitals. Capitol Hill has served overflow patients from D.C. General Hospital's emergency room, he said, but now ambulances will have to go elsewhere, such as Howard University Hospital, Washington Hospital Center and Greater Southeast Community Hospital.

Capitol Hill serves an estimated 27,000 emergency room patients each year, Benjamin said. Many of the patients are victims of accidents and medical emergencies, but a significant portion are there for primary care, he said.

"We are talking about absorbing about 74 patients a day through the hospitals," Benjamin said.

Hospital officials said the cost of uncompensated patient care is a major factor in the problems at Capitol Hill and at other hospitals.

Uncompensated patient care is an umbrella term used by hospital administrators to describe the difference between the cost of caring for patients and the payments received from Medicare, Medicaid, private insurance and patients.

District hospitals collectively lost $176 million in 1988 as a result of uncompensated patient care, based on a study done for the hospital association, Jessamy said.