Columbia Hospital for Women will pay a 28-year-old Alexandria woman, who claimed doctors failed to diagnose a breast cancer in time to save her life, a total of nearly $2.5 million under a settlement agreement approved yesterday in U.S. District Court.

Under the agreement approved by Judge John Garrett Penn, the hospital will pay Mary E. Erby, who has three small children, $1.3 million in cash.

The hospital will also purchase an annuity for the children that will provide them with $1.15 million over the next 23 years, according to Erby's lawyer, James M. Hanny.

Hanny said that Erby, whose doctors estimate she has from three months to three years to live, first went to the hospital in July 1980 for a pregnancy test and complained of a lump on her breast, something Hanny said was not uncommon with pregnant women.

In the lawsuit, Erby claimed the hospital doctors should have conducted further tests at the time to make sure the tumor was not malignant, but no tests were done until more than a year later.

Erby's breast was eventually removed, but by then the tumor had grown and the cancer had spread throughout her body. Hanny said the cancer is now inoperable.

Attorneys for the hospital argued in court papers that attending physicians did tell Erby of the tumor and that they advised her to return for additional testing, but that she failed to return for those tests.

The hospital argued that "the care and treatment rendered . . . was entirely appropriate and comported with all applicable standards of care." The hospital claimed the tumor was not large enough to be readily detectable when Erby first went to the hospital.

Hanny said that the hospital, in agreeing to settle the case one day before a jury trial was scheduled to start, did not admit any wrongdoing.

Under the agreement, Erby's children, who are from 2 to 6 years old, will receive $500 per month each until they become 18. Then they will each receive $50,000 a year for next four years and each will get $100,000 at the age of 25.

Attorneys for the hospital said it is self-insured for claims up to $1 million and that another insurer covers claims for any settlements over $1 million.