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, announced Thursday by Public Safety Minister Steven Blaney, 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 Le'Institut Philippe Pinel in Montreal and the East Coast Forensic Hospital in Dartmouth, N.S.
The Department of Public Safety 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.
The project will expand the system's ability to deal with the most troubled prisoners, Blaney said.
"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."
Prime Minister Stephen Harper said his government is not one to coddle inmates, but it does take mental health issues seriously.
"When we're dealing with violent and dangerous criminals, the public should obviously be protected from such people," Harper said at an event in Montreal. "They should be behind bars.
"But where there are mental-health issues in the criminal justice system, we want to make sure that the criminal justice system has the ability to identify and treat these kinds of issues."
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.