Pentagon City Hospital, which serves about 40 people a day at its location along Interstate 395 in Arlington, will close permanently within the next two months, its owners announced yesterday.

Patients at the hospital will be cared for until the facility closes, and its 300 employees will be helped to find work in the area, hospital spokeswoman Stephanie McNeill said.

"This is an institution that has had a fine reputation," she said. "There are patients there. There's a medical staff there. It is, I think, sad when institutions have to close, but it's the whole atmosphere of change, and we have to go on."

The decision to shutter the underutilized hospital is not entirely unexpected. In this era of managed care, the 51-year-old hospital has been struggling. Its well-known rehabilitation clinic, a carry-over from its days as an orthopedic hospital, saw about 12 to 15 patients a day, and only 10,000 patients were treated at the hospital's emergency room during 1998.

The decision results from the failure of a joint venture between the Arlington Health Foundation, which owns Arlington Hospital, and Columbia/HCA Healthcare Corp., a nationwide health care company.

In 1996, the two organizations purchased what was then called the National Hospital for Orthopedics and Rehabilitation. They renamed the facility Pentagon City Hospital but planned to relocate it to a new facility in rapidly growing Springfield.

From the beginning, the alliance, which Arlington had said was necessary to stay alive in the competitive new world of managed care, was dogged by tax questions, and opposition grew to the new hospital in Springfield.

Politicians and activists argued that a new Springfield hospital was unnecessary and would threaten the viability of nearby Mount Vernon Hospital, which is owned by the competing hospital chain Inova Health Systems Inc.

In December, opponents of the new facility persuaded members of the Health Systems Agency of Northern Virginia, which oversees health care planning in the area, to recommend denying a permit to build the Springfield hospital.

Once that happened, plans for the new hospital were put on indefinite hold and the partnership fell apart.

"The difficulty of acquiring the regulatory approval to go forward with a replacement facility made that almost futile," said McNeill, the hospital spokesman.

Health care officials in Northern Virginia, who have long maintained that there are too many hospital beds in the area, applauded the decision yesterday to close the aging facility. They said other hospitals in the area, including Alexandria Hospital and Arlington Hospital, could easily accommodate more patients.

"The hospital has for years had low utilization," said George Barker, the associate director of the local Health Systems Agency. "In terms of the overall situation, this closing of the hospital is probably a good thing."

Barker said the hospital's rehabilitation unit, while small, will be missed. There is only one other rehabilitation clinic in Northern Virginia, he said, at Mount Vernon Hospital. Barker said other nearby hospitals may also have to expand their emergency rooms slightly.

"That's something I'm sure that they can accommodate," he said.