As his patient lay dying in Savannah Memorial Medical Center, Dr. David Capallo frantically worked the telephones to find a hospital burn unit that would accept John Lacey, a 28-year-old house painter with no medical insurance and burns over 95 percent of hisbody.

Capallo was turned down by 40 hospitals, until Gov. George Busbee promised Baltimore City Hospital that Georgia would guarantee at least $50,000 toward the cost of Lacey's treatment.

Many of the hospitals were full, including two in Georgia with special wards for burn victims. But at least half refused to take Lacey because he had no money.

"We're not condemning other hospitals for refusing to take him," said Bob Porter, a spokesman for the Savannah hospital that stabilized Lacey after a cigarette ignited gasoline he was using to clean a motorcycle engine. "A burn victim is expensive to treat. The cost of his care can run into hundreds of thousands of dollars, and someone has to pay those bills."

Indeed, as he clings to life on an air-and-silicone mattress in the burn unit at Baltimore City Hospital, Lacey has become an example of life-or-death budget decisions that increasingly are being forced on hospitals.

The Lacey case has stirred debate among doctors and administrators across the country over whether a hospital owes its loyalty to all who suffer, or only those in its region.

Among the hospitals who refused Lacey was Washington Hospital Center. There was one bed left on the nine-bed burn unit, already half filled with charity cases, when Dr. Marion Jordan took the call from Savannah last Thursday. Jordan wanted to accept Lacey, said hospital spokesman Jane Snyder, but had to get some financial help from Georgia to do it.

One patient in the burn unit, a Greek medical student hospitalized since he was burned on his part-time job as a pizza cook last September, has run up an $800,000 bill that will never be paid.

"We could have taken Lacey ," Snyder said. " But there's a feeling you should take care of your own and others should take care of their own."

A private nonprofit hospital, Washington Hospital Center accepts any patient from the District, Virginia or Maryland, "no questions asked," Snyder said, "but Lacey was not in our catchment area."

"We don't have unlimited money or taxpayer funds to fall back on, and we were faced with possibly spending all our charity money on someone from thousands of miles away," she said.

"We were mighty worried and thoroughly disgusted that no one would take him because of money," said Gail Bone, president of the Atlas Painting Co. in Savannah, the firm that has employed Lacey for five years as a $5.50-an-hour painter. Last month, he had declined to sign up for company health insurance. He couldn't afford the $45-a-month payments.

Lacey faced high risk of infection and likely death if he weren't moved to a burn center soon after he was injured Thursday, Dr. Capallo told Barbara McElveen, a staff aide for Rep. Bo Ginn (D-Ga.), who was negotiating for Lacey from her office in the Rayburn building. It was 6 p.m. and Capallo was counting every minute.

The phone rang. It was Cleve Laub, director of Baltimore City Hospital's chronic care facility. He said Baltimore would take Lacey on one condition--that Georgia promise to pay his bill so Baltimore taxpayers wouldn't be faced with the burden.

Negotiations with Washington Hospital Center died before they got off the ground, as the Baltimore deal developed.

"Others had turned him down flat because he didn't have medical insurance," said Joan Shnipper, spokesman for Baltimore City Hospital. "At least we were trying to make some financial arrangement. Money was a concern. We felt Georgia should make those funds available instead of getting them from Baltimore taxpayers" who fund the municipal hospital.

While Lacey's doctors pumped antibiotics into him to fight off infection, McElveen phoned the regional administrator for Social Security to see if Lacey qualified for Supplemental Security Income since he was too injured to work. No, it was determined, his unemployment benefits would put him just over the federal cutoff. McElveen phoned the governor.

"How much does the hospital want from us to guarantee the bill?" asked Busbee.

"Fifty thousand dollars," said Laub, who explained that the cost of treating burn victims is $800 to $1,000 a day. McElveen was "shocked" at the price as she switched between the negotiators, relaying word from one to the other.

Busbee didn't blink. A letter guaranteeing that amount was on its way, he said. Laub said to send the patient.

"As soon as we got his guarantee, a plan of action was put into effect," Shnipper said.

Lacey remained in critical condition today, with a little better than 1 in 10 chance of survival, said Dr. Robert Udelsman. Only the soles of Lacey's feet and the top of his head were not burned.

"He's holding his own, but there are major hurdles to be passed," Udelsman said.

Not only are costs for treating chronic burn victims extremely high, but space is at a premium, hospital officials say. Studies show that about 71,000 people are burned badly enough each year to require hospitalization.

"There is a shortage of beds," said Col. Basil Pruitt, a surgeon and director of the U.S. Army burn unit at Fort Sam Houston in San Antonio, Tex., which also turned down Lacey until he was further stabilized.

"A patient with 95 percent burns is a near fatal injury," Pruitt said in a telephone interview. "To move a man halfway across the country to preside over his demise doesn't make a whole lot of sense. We were concerned about his ability to withstand a long transfer."

Pruitt said Savannah never called back with an update on Lacey's condition.

With tighter budgets and government cutbacks in reimbursements to hospitals, physicians and administrators are grappling with more and more decisions like those in the Lacey case, said Jim Houy, vice president of the American Hospital Association, which represents 6,000 of 7,000 hospitals in the country.

"There's a trend for hospitals to be more cautious in this kind of decision-making, given the financial implications," he said. "Hospital administrators are asking, 'Where's my first obligation? Is it to the taxpayer who supports the institution, or everyone else?' How can we expect hospitals to take anyone at any time for any purpose and not go bankrupt? Something has to give."