Now that they have rescued Greater Southeast Community Hospital with loans to keep it open during a reorganization, District officials are focused on reshaping a struggling health care system that does not match the city's needs.

The problem, analysts say, is that while 80,000 uninsured D.C. residents lack basic medical care, the 12 hospitals that dominate the city's health care system are geared largely toward treating a shrinking pool of insured patients who get the most expensive types of care.

It's a situation complicated by heightened competition in the health care industry. For years, the District has had more hospital beds than it needs; now profits are being squeezed as Medicaid and Medicare lower their reimbursements and health plans cut costs by keeping their members out of the hospital.

As a result, half-empty hospitals are going broke competing for patients, while low-income city residents without doctors or good health habits are left without the preventive care that could keep them from becoming ill.

Mayor Anthony A. Williams (D) and D.C. financial control board officials say the mismatch evolved because the District's health care system lacks effective ways to regulate hospital services or treat residents' chronic health problems.

This summer, Williams plans to gather city officials, hospital executives, academics and patient advocates in a series of meetings, hoping to forge a consensus on how to solve what the mayor calls a health care crisis.

Williams wants to create incentives so hospitals can grow strong enough to compete for patients without neglecting the uninsured. The first piece of the puzzle, he believes, is to expand eligibility for the Medicaid program to reach nearly all the District's low-income residents, giving them "dignity" and the freedom to choose doctors instead of relying on emergency rooms for primary care.

"We're going to move in a transition toward this model, and we want a commission representing everyone to help us along this way," Williams said. "We have more beds than patients, and we have to get ahead of the curve."

But as Williams learned this spring, shaking up the city's entrenched health interests can be difficult -- in part, because it could involve putting some hospitals out of business, or at least redefining their roles.

The mayor proposed extending Medicaid coverage to 39,000 uninsured residents, but during budget negotiations with the D.C. Council and control board, the initiative was trimmed to a pilot program for 2,500 people. Lobbying against it were hospitals and doctors who agree that D.C.'s system needs fixing but are reluctant to give up their institutional identities or taxpayer support to reshape D.C. health care.

Critics of the mayor's plan said that handing out more Medicaid cards would not guarantee that everyone would use them, or that low-income residents would stop waiting around in hospital emergency rooms for routine care.

D.C. General and Children's hospitals led the opposition. D.C. General leaders had the most to lose; Williams's plan would have been funded by slashing the public hospital's annual city subsidy of $46 million. Hospital supporters fear that would lead to the demise of the city's biggest trauma center and the hospital that provides the most charity care. They say any change in the city's Medicaid program should come slowly.

D.C. General's inability to attract other kinds of patients has made it more dependent than ever on city subsidies to make ends meet while it tries to develop primary care clinics around the city and pushes for a costly overhaul of its aging buildings.

"D.C. General is caught in a very difficult position," said Sara Rosenbaum, a public health professor at George Washington University. "It sees the uninsured patients almost as the means of [assuring] funds to D.C. General, because the moment patients are insured, they become somewhat more attractive to the other hospitals.

"Patients suffer terribly," she said. "They are denied the coverage they need to get care that could be delivered in alternative settings less expensively."

Health statistics indicate that the current system isn't working and that the poorest residents suffer the most.

The life expectancy of black men in the District is as low as the life expectancy in some developing nations. Death rates from preventable causes, including heart disease, HIV/AIDS, stroke and diabetes, are much higher than national averages. Rates of teen pregnancy, homicide and drug abuse are also higher than national averages.

Patient advocates say that the situation illustrates how the self-preservation instincts of the District's largest health care institutions have resulted in a medical leadership that has lost sight of its mission: keeping people healthy enough to stay out of hospitals in the first place.

"It doesn't really do anybody any good if 80 percent of the money we spend on the uninsured goes to the hospitals," said Andrew Schamess, chairman of the Non-Profit Clinic Consortium. "That's why people flood the emergency rooms: They can't find primary care."

The mismatch in the D.C. health care system also is reflected in financial reports that show many hospitals losing money.

Columbia Hospital for Women and Greater Southeast filed for bankruptcy in the past year. Teaching hospitals are leaning on other organizations or federal subsidies as they try to balance higher operating costs against the need to set prices that compete with community hospitals.

George Washington University Hospital was in such bad shape several years ago that the university sold it to a for-profit firm. Georgetown University Medical Center reported a $62 million loss last year and now is negotiating a merger with MedStar Health, owner of the largest facility in the region, 874-bed Washington Hospital Center.

Yet the city remains awash in excess hospital capacity. Only half its licensed beds were used last year, and the trauma-care network is so extravagant it has become the butt of jokes in medical circles.

In the first quarter this year, only 53 percent of the 4,441 licensed beds were used. One consultant says the city needs only 2,115 beds. Another pegs it at fewer than 1,000.

The District has six hospitals designated as Level One trauma centers. All are staffed round-the-clock with doctors, nurses and technicians trained to handle severe injuries. They are prestigious services, but costly.

The city has 523,000 residents; the American College of Surgeons figures the city has enough Level One trauma centers to cover 6 million people. Maryland, with 10 times the city's population, has only two Level One trauma centers. Northern Virginia has one.

"There are a lot of places where the hospital arms race is a real phenomenon, but there are very few that are as flagrant as D.C.," said Gerald Strauch, director of the American College of Surgeons trauma department. The city could probably get by with two trauma centers, he said.

Bailus Walker, a key health care adviser to Williams, said the D.C. agency that issues permits to hospitals to buy equipment or change services hasn't stepped in because it has been manipulated by powerful medical institutions and allows them to do what they want.

"The system has been subject to political machinations and has not given us the kind of information or direction that would allow us to do some rational allocation of resources," Walker said.

MedStar Senior Vice President John L. Green said to do that, D.C. officials will have to use a firm hand.

"There are no really easy, simple solutions," Green said. "The government is going to have to take a leadership role on how [hospitals] should reduce capacity. You can't expect providers to just go about closing institutions that they believe are needed."

Walker wanted to start that process this week, but the city bailout for Greater Southeast delayed it. If that hospital had closed, the city's poorest ward would have lost its main health care provider.

The city came up with $8.5 million to keep Greater Southeast going for at least three months while the hospital reorganizes under bankruptcy court protection and D.C. government supervision. Williams said the hospital's remedies must match his vision of a new system.

"The government and the private sector are going to have to determine . . . where we're going to invest our resources, and the providers will have to figure out a way to function within those parameters," said Francis Smith, executive director of the control board. "It will have to be a combination of restructuring and institutions aligning themselves to meet what the market bears."

Any significant changes in the makeup of D.C. hospitals could reverberate across the region. The city's 12 nonfederal acute-care hospitals are the heart of the regional health system; nearly half their patients come from Maryland or Virginia.

Consolidations, mergers and shutdowns are inevitable, said hospital consultant Susan Hansen. "Somebody's going to have to take the fall eventually," she said. "At the moment, there is no incentive for anybody to give up anything for the greater good."

FALLING OCCUPANCY IN D.C. HOSPITALS

Nonfederal acute-care hospitals in the District have seen dramatic occupancy drops in recent years.

Acute-care facility: Children's Hospital

Patient days 1996: 59,252

Patient days 1998: 56,368

Change: -5%

Acute-care facility: Columbia Hospital for Women

Patient days 1996: 21,162

Patient days 1998: 17,472

Change: -17%

Acute-care facility: D.C. General Hospital

Patient days 1996: 64,081

Patient days 1998: 56,522

Change: -12%

Acute-care facility: George Washington University Hospital

Patient days 1996: 76,345

Patient days 1998: 58,121

Change: -24%

Acute-care facility: Georgetown University Hospital

Patient days 1996: 93,298

Patient days 1998: 84,706

Change: -9%

Acute-care facility: Greater Southeast Community Hospital

Patient days 1996: 86,195

Patient days 1998: 75,088

Change: -13%

Acute-care facility: Hadley Memorial Hospital

Patient days 1996: 17,172

Patient days 1998: 12,705

Change: -26%

Acute-care facility: Howard University Hospital

Patient days 1996: 76,494

Patient days 1998: 80,882

Change: +6%

Acute-care facility: Providence Hospital

Patient days 1996: 84,456

Patient days 1998: 81,827

Change: -3%

Acute-care facility: Sibley Memorial Hospital

Patient days 1996: 63,641

Patient days 1998: 56,618

Change: -11%

Washington Hospital Center

Patient days 1996: 192,113

Patient days 1998: 214,046

Change: +11%

The District has 523,000 residents, but it has enough Level One trauma centers to care for 6 million people. Demand for trauma care has declined recently, and some experts argue that the city only needs two trauma centers.

Patients treated at trauma centers in the District*

Trauma center/ER: Georgetown University Hospital

1997: 335

1998: 337

Trauma center/ER: Washington Hospital Center

1997: 726

1998: 602

Trauma center/ER: D.C. General Hospital

1997: 1,574

1998: 1,538

Trauma center/ER: Howard University Hospital

1997: **

1998: 700

Trauma center/ER: Children's Hospital

1997: 984

1998: 971

Trauma center/ER: George Washington University Hospital

1997: 402

1998: 260

*Figures may include trauma patients who were treated at trauma centers in the city but were not residents of the city.

**Not available

SOURCES: D.C. Department of Health, District of Columbia Hospital Association, Georgetown University Medical Center