The health watchdog is launching a review into how it handled a 2015 report raising concerns about Whorlton Hall hospital.
Former Care Quality Commission (CQC) inspector Barry Stanley-Wilkinson said he wrote the report four years before BBC Panorama revealed the alleged abuse of patients.
The CQC said there would also be a review of its regulation of the County Durham hospital between 2015 and 2019.
Ten workers have been arrested.
BBC Panorama’s undercover filming appeared to show patients with learning difficulties being mocked, intimidated and restrained.
The site had at least 100 visits by official agencies in the year before the abuse was discovered.
The CQC said it has commissioned David Noble QSO to undertake an independent review into how it dealt with issues raised by Mr Stanley-Wilkinson.
It has previously said his draft report raised no concerns about abusive practices.
A second, wider, CQC investigation “will include recommendations for how its regulation of similar services can be improved, in the context of a raised level of risk of abuse and harm”.
Responding to the announcement, Health Secretary Matt Hancock said he had been “appalled” by the abuse allegations and was “determined to ensure lessons are learnt so this never happens again”.
He said: “It is clear that opportunities to intervene were missed and we must be open and transparent in getting to the bottom of why this happened.”
Seven men and three women were arrested at addresses in Barnard Castle, Bishop Auckland, Darlington and Stockton last week.
They were being questioned about offences relating to abuse and neglect at the privately-run NHS-funded unit, Durham Police said.
Cygnet, the firm that runs the 17-bed hospital unit, has said it was “shocked and deeply saddened” by the allegations.