ALBANY — Two Manhattan hospitals targeted for closure by a special state commission are signaling that they have given up the fight to remain open, according to a source in the Spitzer administration.

Cabrini Medical Center in Gramercy Park and St. Vincent’s Midtown Hospital, formerly St. Clare’s Hospital, have indicated their intention to apply for millions of dollars in state and federal grants that are conditioned on compliance with the directives handed down by Governor Pataki’s Commission on Health Care Facilities in the 21st Century.

Through a state program funded in part by the federal government, the Health Department is offering $550 million to 81 hospitals and nursing homes that have been forced to close, downsize, or undergo a major conversion. The money is intended to reimburse the institutions for the costs of complying with the commission’s directives.

A spokeswoman for St. Vincent’s Midtown, Marlene Bloom, said the hospital tried in vain to convince the Spitzer administration that it should stay open and would soon submit an application for the grants. “We have no choice but to be in compliance with the Berger commission,” she said, referring to the commission’s chairman, Stephen Berger.

A spokeswoman for Cabrini said the hospital has not applied for the grants and would not comment on whether it plans to do so.

Like many of the cash-strapped institutions that were ordered to close or accept drastic changes by the commission, the two hospitals initially responded with protest, arguing that they provided a critical service in their community and were capable of turning around their finances.

One of several hospitals waging a legal battle, Cabrini sought an injunction in state Supreme Court to stop the state from shutting it down, while St. Vincent’s Midtown appealed directly to state Health Department officials.

While the hospitals are apparently succumbing to pressure to close, other hospitals marked for closure are not giving up. They hope they will be able to escape a death sentence if they stick it out for another year. Hospital sources say New York Westchester Square Medical Center in the Bronx and Community Hospital at Dobbs Ferry, which have not applied for the grants, have the best chances of survival.

In his last term, Governor Pataki established the Berger commission to deal with the politically sensitive task of coming up with a plan to downsize, modernize, and restructure a hospital industry burdened by debt, inefficiency, and rising health care costs.

The Spitzer administration has vowed to carry out the recommendations, which were issued in a controversial report last fall and became law on January 1, although some Legislature leaders have indicated that they would like to pass new legislation that could undo some pieces of the commission’s report.

The commission concluded that Cabrini, a 338-bed acute-care facility in the Gramercy Park neighborhood, was a financially troubled hospital occupying expensive real estate whose patients could easily be absorbed by the cluster of neighboring hospitals that have caused the area to be dubbed “Bed Pan Alley.”

St. Vincent’s Midtown, an affiliate of St. Vincent Catholic Medical Center, is “poorly utilized” and hemorrhaging cash, according to the commission. Hospital officials have argued that the hospital serves as a valuable safety net for commuters and tourists around Times Square. The parent medical center proposed a plan to downsize and reconfigure the Midtown campus but was turned down. “The midtown Manhattan community does not need a 56-bed medical/surgical facility,” the report said.

The commission has recommended the closure of three other hospitals in New York City — Manhattan Eye, Ear, and Throat Hospital in Manhattan, Victory Memorial in Brooklyn, and Parkway Hospital in Queens — and three other hospitals upstate. It also recommended reconfiguration, merger, and conversion plans involving an additional 48 hospitals.

Once implemented, the commission estimates its plan will save the state about $1.5 billion a year and reduce the number of hospital beds statewide by about 4,200.