TWICE NOW, the District's Health Planning and Development Agency has turned down Doctors Hospital's request to move to a larger building from its present facility. And, in our view, the city agency, which must approve all hospital planning, was right both times -- though not necessarily for the best reason.

Not that the agency did not have sound reasons for its decision. According to the agency's director, there were too many unanswered questions about the hospital's plans. The hospital did not have enough in its budget to pay for renovation of its new site -- and could not give a reasonable assurance that such money could be found. The agency also concluded that hospital officials had agreed to a complicated and questionable financial scheme to lease the renovated building -- an arrangement that involved a corporation with some Doctors Hospital directors on its board. In addition, the lease forbids the hospital from spending more than a specified amount on renovation -- even if city officials required expensive alterations to meet fire or safety codes.

But there is an even better reason to deny the hospital permission to relocate -- a reason the agency was not in a position to take into account: The hospital isn't needed, even in its present location, in the opinion of most close students of the local hospital situation. That question hasn't really entered into the discussions about the future of Doctors Hospital, because two years ago, when the question came under serious review, Joseph Yeldell, then director of the Department of Human Resources, informally approved the relocation idea. That effectively confined the health-planning agency to a yes-or-no decision on the actual relocation project.

Had the agency been free to consider the broader question of need, it could not have helped noting that currently each of the city's 15 hospitals is at least 25 percent empty. One reason for this vacancy rate is that a number of hospitals have been built in the past few years, while others have expanded their services. Another reason hospital-vacancy rates are more acute in this area than in other parts of the country is that there are a large number of federal facilities here that also provide care.

The excess of hospital beds in the area has resulted in financial difficulties for every hospital -- and higher fees to patients. According to Blue Cross, hospital care in the District costs as much as $381 per day, while comparable medical care costs $213 a day in Maryland and $198 in Virginia.

If the number of hospital beds in the city is judiciously trimmed, it might be possible to get a better hold on increasing costs without affecting health care. If the health-planning agency had not been precluded from examining whether Doctors Hospital is necessary, it almost certainly would have concluded that Doctors Hospital should close down. As it is, it did the next best thing by rejecting -- for other good and sufficient reasons -- a request for relocation to larger facilities that would only have added to the city's hospital-vacancy rates and, by extension, to the city's hospital costs.