The family of a teenager who died at a regional West Australian hospital hours after being admitted for tonsillitis has reached a settlement with the health department for an ex-gratia payment.

Kieran Watmore died 15 hours after he was admitted to Albany Regional Hospital in 2008.

A coronial inquest found systemic deficiencies at the hospital led to the 17-year-old's death.

The Watmore family was suing the state government but dropped the action earlier this year.

A spokeswoman for the Health Department confirmed on Tuesday that a settlement had been reached.