Smith was a troubled teen whose long experience in the prison system ended in her choking to death in a cell while guards looked on. A coroner's inquest produced more than 100 recommendations aimed at improving the lot of mentally troubled prisoners.
The new project is aimed at female prisoners with serious mental problems.
It involves the Royal Ottawa health-care group's Brockville Mental Health Centre, which will set aside beds for troubled female offenders, and L'Institut Philippe Pinel in Montreal and the East Coast Forensic Hospital in Dartmouth, N.S.
The Public Safety Department says recent statistics show that at admission, 13 per cent of male offenders and 29 per cent of women offenders in federal custody self-identified as having mental health needs.
Public Safety Minister Steven Blaney says the project will expand the system's ability to deal with the most troubled prisoners.
"Developing a partnership with the Royal Ottawa Health Care Group offers a timely opportunity to further our efforts to better manage those offenders with the highest needs through provincial health-care partnerships," he said in a news release.
George Weber, president of the Royal Hospital Group, said proper mental health care can pay dividends.
"We know that a significant number of offenders, especially women offenders, suffer from some form of mental illness and that those who receive treatment are not only healthier but they are also less likely to reoffend," he said.
Smith had a long history of choking herself. Before she died, guards were told not to intervene in her self-strangulation as long as she was breathing.