When the giant Social Security bill passed Congress last month, it included an amendment that will cut the money private hospitals receive from Medicare to pay profits to their investors.

The money--$100 million of the $300 million previously budgeted for "return-on-equity" payments to the for-profit hospitals--is a minuscule part of the $47 billion Medicare budget for fiscal 1984.

But the fight over the funds, which the hospitals use not only to bolster their dividends but as a base for raising capital to expand, set off a fierce battle between the House and Senate and split the powerful health-care lobby.

The cut, as one Capitol Hill aide put it, "touched only the tip of the iceberg" of the little-known way in which the government helps finance hospital contruction through special Medicare payments. And it may encourage Congress to look for other ways to control the cost to the federal government of hospital care.

The funds first came under attack when Rep. Richard A. Gephardt (D-Mo.), looking for a way to reduce the cost of the the Medicare program, shoved an amendment through the House that would have eliminated return-on-equity payments. Then several groups of nonprofit hospitals split off from the rest of the hospital lobby and publicly supported the Gephardt proposal.

But Gephardt's amendment ran into a blitz of opposition from private-hospital lobbyists, ranging from Michael D. Bromberg of the Federation of American Hospitals to former House Ways and Means chairman Wilbur D. Mills, who now represents the National Hospital Corp. of America.

"I'm not sure the government should be encouraging new capital expenditures for hospitals at a time when Medicare is almost bankrupt and, if anything, we have too many hospital beds," said JoElyn McDonald, a Gephardt aide.

The Republican-controlled Senate, however, disagreed. With the private-hospital lobbyists prowling the halls with elaborate slide shows and dire predictions, key Senate leaders argued that Gephardt's amendment was poor public policy. The chamber voted to kill it.

The battle was joined in conference, where House conferees reportedly stood, 7-to-1, in support of Gephardt. The Senate buckled, agreeing to cut the payments by one-third.

The payments date back to the mid-1960s, when Medicare was created and the nation faced a shortage of hospital beds. Congress decided not only to reimburse hospitals for Medicare patient costs but to make payments for new equipment and construction.

To help offset the tax-exempt status of nonprofit hospitals, additional return-on-equity payments were approved for the institutions attempting to make profits.

By 1983, however, the capital costs of the Medicare program had ballooned to $3.2 billion, with $300,000 tucked in as extra payments to for-profit hospitals.

The Congressional Budget Office estimated that Medicare was paying $3,360 per bed to nonprofit hospitals for capital costs and, because of the return-on-equity payments, more than twice as much--$7,170--to for-profit hospitals.

These annual payments are in addition to the new flat fees the government will pay hospitals in advance for the care of Medicare patients. They also became an obvious target for budget cutters, especially when Gephart and others began linking skyrocketing hospital costs to soaring capital expenditures.

Over the past four years, even during a sluggish economy, hospital spending for equipment and construction rose from $221 million to $1.3 billion in Florida alone. In California, spending leaped from $165 million a year to $665 million. In Texas, it rose from $492 million to $1.5 billion.

Private hospitals, many of them controlled by a handful of large corporations, also have become popular on the stock market because of their growth rates and profitability. The annual growth rates of the top five private hospital groups have averaged more than 30 percent recently, with before-tax profits running as high as 26 percent.

"You simply have to ask whether government should be subsidizing this," McDonald said.

Gephardt's amendment, though, also publicized Medicare's role in helping all hospitals finance capital improvements. James Jaffe, Gephardt's top aide, hinted that Congress may take a look at the capital-reimbursement program for all hospitals, including the nonprofits, as a further way of controlling rampaging Medicare costs.

"If a hospital costs $10 million to build and is subsequently sold for

00 million, reimbursement from the government immediately rises to help pay the mortgage," Jaffe said. He says this "happens all the time" and results in "substantially higher costs" to the Medicare program and "no change in the amount or quality of care."

But the hospital lobby, whose united front has defeated proposed cost-containment plans for years, has been left on wobbly legs by this squabble.

The split so annoyed Bromberg of the hospital federation that he fired off a letter to the rebel groups, accusing them of tactics that "do not deserve mention in writing."

The nonprofits countered that they backed Gephardt to maintain a competitive balance with the booming for-profit hospitals. They argued that under the new flat-fee arrangement, they should get the same return-on-equity payments as the private hospitals. Lacking that, they opted for keeping the balance by supporting no payments to anyone.

But Bromberg was furious. "The politicians now know that the hospital industry can be divided," he wrote, observing that "until now" the private-hospital groups had avoided attacking some of the sacred cows of the nonprofit hospitals, such as tax-exempt bond financing.

When the fiscal 1984 budget is sent back to congressional committees, it will recommend cutting Medicare funding another $1 billion. One of the more obvious places to look for that money is not only the return-on equity funds but the entire $3.2 billion allocated for per-bed payments for capital expansion. graphics/chart: CONSTRUCTION COSTS FOR MEDICAL FACILITIES* By Peter Alsberg for TWP percent recently, with before-tax profits running as high as 26 percent.

"You simply have to ask whether government should be subsidizing this," McDonald said.

Gephardt's amendment, though, also publicized Medicare's role in helping all hospitals finance capital improvements. James Jaffe, Gephardt's top aide, hinted that Congress may take a look at the capital-reimbursement program for all hospitals, including the nonprofits, as a further way of controlling rampaging Medicare costs.

"If a hospital costs $10 million to build and is subsequently sold for

00 million, reimbursement from the government immediately rises to help pay the mortgage," Jaffe said. He says this "happens all the time" and results in "substantially higher costs" to the Medicare program and "no change in the amount or quality of care."

But the hospital lobby, whose united front has defeated proposed cost-containment plans for years, has been left on wobbly legs by this squabble.

The split so annoyed Bromberg of the hospital federation that he fired off a letter to the rebel groups, accusing them of tactics that "do not deserve mention in writing."

The nonprofits countered that they backed Gephardt to maintain a competitive balance with the booming for-profit hospitals. They argued that under the new flat-fee arrangement, they should get the same return-on-equity payments as the private hospitals. Lacking that, they opted for keeping the balance by supporting no payments to anyone.

But Bromberg was furious. "The politicians now know that the hospital industry can be divided," he wrote, observing that "until now" the private-hospital groups had avoided attacking some of the sacred cows of the nonprofit hospitals, such as tax-exempt bond financing.

When the fiscal 1984 budget is sent back to congressional committees, it will recommend cutting Medicare funding another $1 billion. One of the more obvious places to look for that money is not only the return-on equity funds but the entire $3.2 billion allocated for per-bed payments for capital expansion.