Updated

RICHMOND, Va. -- Virginia violates federal law by needlessly institutionalizing the intellectually disabled and it fails to provide adequate community-based treatment, the Justice Department said in a stern warning to the state.

The Justice Department gave Virginia officials less than two months to reach an agreement to fix the problems or else the agency said it may sue.

The department began investigating Virginia's largest state-run institution, the Central Virginia Training Center, in 2008, but the probe ballooned into an examination of Virginia's entire mental health system.

Currently, more than 1,100 individuals are housed at five centers statewide, costing $194,000 each -- nearly three times as much as community treatment.

"These inadequacies have resulted in needless and prolonged institutionalization of individuals with disabilities who could be served in the community with more independence and dignity at a fraction of the cost," the report said.

Virginia is among five states that operate multiple state-run institutions for individuals with intellectual and developmental disabilities. It is also one of only a handful of states that has yet to close a state-operated facility.

The report described a segregated life in an institution setting with limited privacy, rare opportunities for meaningful employment and virtually no chance to interact with non-disabled peers. Residents can't choose what or when to eat, what to watch on television or make many decisions for themselves.

Residents have repeated accidents and injuries, inadequate behavioral and psychiatric interventions, and relies on restraints to heavily, the report said.

The department also determined Virginia has an extremely long waiting list for community services, currently at 6,400.

Republican Bob McDonnell, who made the report public Friday, has proposed $30 million for more community-based treatment, which was commended by the department. The Legislature is considering the proposals.

"Nothing in the report is surprising to us. We knew that it was coming," said Keith Hare, a deputy secretary of health and human resources. "We really feel like that this is just a starting point to be able to move toward a goal that the governor has had for a number of years."

Hare and other health officials said they would work with the department to fix the problems.

"These are systemic problems that have been inherent in the system for a long time," Hare said.