Undersecretary of Health and Human Services John A. Svahn has moved to help negotiate an end to the "Baby Doe" controversy that has prompted the government to send federal investigation squads into hospitals to discover whether handicapped babies are being denied proper medical care.

Participants in two meetings that included representatives of medical organizations and right-to-life groups appeared to be nearing broad agreement on one possible mechanism for handling mistreatment cases.

Local committees would be established to receive complaints and assure that infants are not denied medical treatment simply because they might grow up retarded, Svahn said.

Last year, HHS promulgated a controversial rule forbidding the withholding of treatment from handicapped babies and calling for the hanging of posters in delivery rooms and the establishment of a hot line to receive complaints of improper treatment.

Although a federal court struck down the regulation as "arbitrary and capricious," HHS continues to run the hot line, and investigators continue to be dispatched to hospitals around the country on "emergency" investigations, a spokesman said.

The hot line so far has logged more than 1,000 telephone calls, though most are not reports of infants in trouble. HHS investigated about 30 cases, including 10 to 15 on an emergency basis. In these cases, investigative teams have been dispatched to hospitals within hours of the hot-line call.

Both sides in the controversy--right-to-life groups that favor the regulation and medical groups that don't--criticize the way the Baby Doe squads have "stormed into hospitals . . . totally unprepared" and reportedly disrupted hospitals to the extent that treatment of other patients has been affected, according to court documents and several people involved in the Baby Doe program.

In one case an emergency team of untrained workers was dispatched to a hospital several hundred miles away. They seized records of one infant's treatment without written authority or permission from the parents to look at the records.

One official estimated that it took the hospital staff 50 hours or more to deal with the investigators, and in the end the investigators left without examining the infant involved, according to court records and participants in the event.

To resolve the Baby Doe controversy, Svahn said yesterday, a new federal regulation and possibly some mechanism like local hospital committees may be necessary.

Svahn said the two sides were initially far apart in their recommendations for handling the issue, and he met with them separately. But after a federal court halted enforcement of one Baby Doe rule and HHS began to write another, he said he brought the opposing groups together to discuss the newly written regulation and other solutions.

One proposal that appears to have gained ground would establish local hospital committees, called Bioethical Review Committees, to rule on whether handicapped infants are receiving proper treatment. The committees would be made up of not only doctors and hospital administrators, but also clergy and lay members.

The proposed committees would write guidelines on the treatment of handicapped infants and other sensitive bioethical issues. Committee meetings would be convened when disagreements arose over withholding treatment, or at the request of any hospital staff member, family member, or the public.

The proposal was made by 10 groups that have fought the Baby Doe rule, including the American Academy of Pediatrics and the American Medical Association. While disagreement continues over how much power and independence such committees should have, spokesmen for both sides say some progress has been made.

Groups in favor of the Baby Doe rule, including right-to-life groups and associations representing the handicapped, want to make sure that any such committee can operate independently of the hospitals involved.

The Baby Doe rule was put into effect in March. It required hospital delivery wards and nurseries to post government notices that failure to feed and treat handicapped infants is illegal. A hot-line number was provided on the posters so complaints about violations of the law could be called directly to federal investigators.

The rule, an extension of a civil rights law, was named the Baby Doe rule after an infant in Bloomington, Ind. The infant had Down's syndrome and other medical problems and was allowed by parents, doctors, and a state court to starve to death. The unnamed infant was called Baby Doe.

The Baby Doe rule was established to prevent such cases. But immediately after it went into effect, U.S. District Court Judge Gerhard A. Gesell struck it down.

HHS has published a new version of the rule for public comment. It is much like the first rule, but makes at least one concession to medical groups by adding language stating that federal law "does not require the imposition of futile therapies which temporarily prolong the process of dying."

Advocates of both sides said they have heard "horror stories" about the way untrained, non-medical federal investigators have showed up at hospitals at night to commandeer records and question doctors and nurses. Two cases were reported in the New England Journal of Medicine last week by James E. Strain, president of the American Academy of Pediatrics.

The squads have created not only irritation but possibly serious disruption of treatment for some patients, said Paul M. Rosenberg, an associate director of Strong Memorial Hospital in Rochester, N.Y., of one of the cases reported in the New England Journal.

A "Baby Doe squad" showed up at Strong Memorial on March 29, after newspapers reported that Siamese twins born with one body and two heads were not expected to live.

The squad came in with no authority in writing, with no evidence that a call actually came into the hot line, and no written requests for specific information, Rosenberg said.

Frederick Wirth, a neonatalogist at the Eastern Virginia Medical College in Norfolk, was asked by the government to fly to Rochester to check the twins to assure that they were getting adequate care.

When Wirth arrived in Rochester at 10 p.m., however, he said he found the Baby Doe squad going over medical records in a hotel room. "They didn't even think of asking the parents whether they could see the child's records. I asked if they had asked the parents for permission to examine the baby and they said no. I told them I wouldn't touch those records until permission was asked."

The parents were asked, and refused to let the Baby Doe squad investigate. The twins, who were born at one hospital and moved to Strong Memorial shortly after birth, were due to be moved back to be with their mother.

"Because the investigators were here, we had to keep the twins away from their mother for a few days when she wanted to be with them," said Rosenberg. "They died a little while after they finally got back to" their mother.

Wirth said he supports in principle the idea of reviewing such cases, but said he has quit the Baby Doe program "until this mess gets straightened out." Rosenberg said one family withdrew a seriously ill patient from the hospital before completion of treatment because of the incident, and said since hospital staff were pulled away from their posts, other patients may have been affected, though that is uncertain.

In another case, at Vanderbilt University Hospital, the Baby Doe squad arrived and met with hospital staff and doctors from 9:30 to 11:30 one night after a hot-line call which claimed that 10 infants were not being fed or treated properly.

Norman B. Urmy, director of the hospital, estimated that the apparently spurious complaint caused an investigation that was "time-consuming, disruptive and indirectly expensive."