The bulk of Broadmoor hospital is to be demolished and rebuilt in a £200m programme designed to bring the world-famous Victorian institution into the modern era. The decision by ministers, announced yesterday, puts an end to debate about whether large, high-security units are the right places to treat severely disturbed offenders deemed a risk to the community and to themselves.

Critics have declared Broadmoor and the other "special" hospitals to be beyond reform after a series of scandals. But ministers have concluded that moves to change the culture of the units are succeeding in bringing them more into the mainstream of mental healthcare. In a written Commons statement, the mental health minister, Rosie Winterton, said outline proposals for Broadmoor contained constructive options to provide "a safer and more effective clinical environment". She said the cost would be unlikely to exceed £190m at today's prices.

The announcement was kept low-key because of anxiety that the tabloid press would claim improvements to the hospital would amount to feather-bedding the patients, who include perpetrators of some of the most notorious crimes of recent years. Louis Smidt, who chairs the West London mental health trust, which has run the hospital since 2001, said: "This will enable us to provide appropriate, modern healthcare facilities for patients at Broadmoor, the majority of whom are detained with significant restrictions placed upon them for many years."

Broadmoor was built in 1863 and occupies a 53-acre hilltop site in Crowthorne, Berkshire. Two years ago, the healthcare inspectorate condemned its older wards as "not an appropriate humane environment" and "lacking basic standards of privacy, dignity, cleanliness and amenities".

In its early years, Broadmoor enjoyed a fine reputation for enlightened treatment of those then called the criminally insane. More recently, however, its record has been questioned and it has suffered from association with the findings of the 1999 inquiry into another special hospital, Ashworth on Merseyside. As part of a security crackdown Broadmoor built a second perimeter fence and imposed severe restrictions on its patients.

Although most of those restrictions remain in place, Broadmoor has been quietly reforming: the number of patients has been reduced to 280 by the transfer of 140 others, mainly to medium-secure units; the 39 remaining women patients are to be transferred in 2007 to a new unit in Ealing, west London; and a state of the art facility has opened for the specialised treatment of men with dangerous and severe personality disorders.

Critics of the three English high-security hospitals - the third is Rampton in Nottinghamshire - expressed dismay at the announcement. Ray Rowden, who was once director of commissioning for the three hospitals, said Britain had failed to learn from models of forensic psychiatric care in Australia and the Netherlands. "The [English] model is fundamentally flawed and it's profoundly depressing that a government supposedly committed to evidence-based healthcare is not learning from elsewhere in the world."

But Andrew McCulloch, chief executive of the Mental Health Foundation charity, said there was a need for some high-security care. "There is a tiny proportion of people in every society who are mad and bad and unfortunately likely to stay that way for a good while."

Hospital's patients

Peter Sutcliffe, the Yorkshire Ripper, who admitted the murder of 13 women and the attempted murder of seven others between 1978 and 1980.

Anthony Hardy, who confessed to killing three women in north London in 2002 and dismembering two of their bodies.

Peter Bryan, who killed three people over a 10-year period, including one inside Broadmoor, and cooked and ate the brains of one of his victims.

Mahmoud Abu Rideh, a Palestinian refugee held in detention for three years without charge or trial. Released earlier this year

Patient X, a woman held for 40 years, then released at age 94 in 2003 under Broadmoor's reform programme.