Some see it as a classic example of how government intervention can produce economic chaos: the disastrous condition of New York state's hospitals.

Hospitals there are among the financially sickest in the nation as a result of state price controls, a federally-backed building spree, huge amounts of debt, no money to pay the bills and fewer patients staying shorter periods.

• On January 1, state price controls -- which, ironically, have kept many hospital prices artificially high -- will be lifted.

• It is widely expected that this will put some hospitals in danger of defaulting on their government-backed debt, which financed building projects costing hundreds of millions of dollars.

• Some $4.2 billion of the $7 billion of debt is owed to the federal government, which allowed the hospitals to borrow on favorable terms.

• There are now 40 percent more hospital beds in New York state than there are patients.

Some estimate that as many as 80 percent of New York's hospitals are already technically in default.

While other states are managing to do without help from the federal government's Hospital Mortgage Insurance Program, created in 1968, New York climbed aboard some years back and now accounts for 87 percent of the program's outstanding loans.

The state's price control system allows hospitals to jack up patient prices in the early years of a construction loan -- thereby encouraging hospitals to build more and more unneeded facilities.