WASHINGTON (Map, News) - The federal government will get new authority to regulate D.C.’s troubled mental institution under a settlement that avoids federal litigation over massive problems in the hospital’s billing and accounting departments, The Examiner has learned.

St. Elizabeths hospital will sign a “corporate integrity agreement” with the Department of Health and Human Services to avoid costly federal legal action over allegations of fraud in the hospital’s Medicare billing, according to sources with intimate knowledge of the negotiations.

The deal will give federal authorities broad power to regulate, monitor and if, necessary, restructure St. E’s, which only emerged from a court-imposed receivership in 2002.

The Department of Justice began investigating the hospital in June, 2007 on suspicions that the hospital was improperly billing the federal government for patient care.

While that investigation was pending, a team of inspectors from Justice came to St. E’s in February to check into allegations that the hospital was violating its wards’ civil rights. The integrity agreement may defuse both investigations, according to one source familiar with the case.

Sources spoke on condition of anonymity because the negotiations are supposed to be secret.

D.C. was led in negotiations by its acting attorney general, Peter Nickles, who once was the lead attorney in a massive class-action suit alleging that St. E’s was failing its patients.

Critics say that the hospital is still dangerous for its wards. According to a January report released by University Legal Services, a nonprofit advocacy group, 11 patients died at St. E’s last year — the same as had died in the previous two years combined. The report’s authors concluded that the quality of patient care had declined under Mayor Adrian Fenty’s watch.

ULS’ report, “Patients in Peril,” was filed as part of ongoing litigation over St. E’s care.

Got a tip on St. E’s? Call Bill Myers at 202-459-4956 or send an e-mail to bmyers@dcexaminer.com.