EX-OFFICIAL AT NATIONAL MEDICAL FACES CRIMINAL CHARGES

Three private groups are seeking approval from the District government to build 247 psychiatric and drug-treatment beds in what would be the first sizable expansion of the city's for-profit mental health facilities in recent years.

The groups say the beds are sorely needed, but critics, who include the city's largest health insurer and the staff of the D.C. health planning agency, say new beds are unnecessary and could add to already escalating medical expenses here.

The debate in the District reflects a controversy nationwide surrounding the increase in construction of psychiatric hospitals and drug treatment centers, many by large, for-profit medical chains catering to well-insured patients. These chains have often used aggressive advertising to fill their beds, though some psychiatrists say outpatient care would be cheaper and more effective.

Many insurers and business executives have complained that the construction binge has been a big factor in driving up health care costs.

There are about 350 acute-care psychiatric beds in the city, not including St. Elizabeths Hospital, the District's public psychiatric center, which serves many of the city's needy patients. The planning agency staff noted that several city hospitals' psychiatric facilities have been at less than 80 percent occupancy.

Officials with the private groups argue that the city's mental health services are inadequate, and that additional capacity is needed to address a growing demand for psychiatric services and drug treatment.

"A lot of practitioners report that they are having difficulty getting people into facilities," said Marie E. Pincus, president of Capitol Psychiatric Group, one of the applicants. "We think there are a number of unmet {psychiatric} needs."

The private groups are applying to D.C. regulators for permission to offer a range of new services, and they have encountered much skepticism.

The area's largest health insurer, Blue Cross and Blue Shield, has questioned the need for new psychiatric beds. In a public hearing recently, Dr. Robert Keisling of the city's Commission on Mental Health Services also raised concerns about the cost of the proposals.

The staff of the city's State Health Planning and Development Agency completed a report last week opposing all the new facilities.

An agency hearing is scheduled for tonight to review the proposals. The agency's director must approve all new medical facilities in the District and is not bound by the staff's recommendations.

In the District, there is one private psychiatric hospital, the Psychiatric Institute of Washington, a 201-bed facility owned by National Medical Enterprises .

Psychiatric Institute is now proposing to add a 34-bed unit for patients suffering from psychiatric and susbtance abuse problems and a 13-bed residential unit for children and adolescents. The units, estimated to cost $3.4 million, would be at the institute's facilities at 2141 K St. NW and 4460 MacArthur Blvd. NW.

Capitol Psychiatric Group is proposing to build a 60-bed acute-care psychiatric hospital at 3939 Wisconsin Ave. NW and a 60-bed residential treatment center for children in Fort Lincoln New Town in Northeast Washington. The combined cost of the facilities is projected to be about $20 million.

A third group of private investors called the Riverside Treatment Center wants to build an 80-bed psychiatric hospital for children at 2105 Good Hope Rd. SE, at a cost of $6 million. The health planning agency recently dropped the group from consideration tonight because of alleged technical problems with its proposal, but Riverside's attorney, James M. Christian, said the group plans to resubmit its application.

"No convincing evidence has been offered to show that the current supply of acute care and residential beds is being strained," Steven Sieverts of Blue Cross and Blue Shield said in testimony prepared for this evening's hearing. He said current mental health patterns are "distorted toward excessive reliance on inpatient services" and predicted the proposals could "needlessly {add} millions and millions of dollars to the region's medical care costs."

But Anthony M. Rachal, an attorney for Psychiatric Institute, said that demand for his hospital's services has risen sharply in recent years, as reflected in the facility's 87 percent occupancy rate, compared with 70 percent three years ago.

"They're being asked to pay for some of the {psychiatric} beds," Rachal said of Blue Cross. "On the other hand, their customers have needs, and their customers' needs can't remain unsatisfied."