The report wants urgent action to tackle bed-blocking

It says over a quarter of beds in Welsh hospitals are occupied by people who do not need to be there.

However the Audit Commission found a recent fall in the number of patients waiting over 18 months for treatment was encouraging.

Health minister Jane Hutt said the findings reinforced policies being followed in Wales.

But Conservatives in the assembly are calling for her to resign, claiming the report points to taxpayers' money being wasted.

The report, entitled Transforming Health and Social Care in Wales, describes deep-seated problems in the ways the health service is run.

It has called for urgent action to reduce the numbers of beds in Wales being blocked through delays in transferring patients elsewhere.

Failure to take the opportunity to accomplish better performance and make essential reforms would mean "continuing unsustainability in health services and serious consequences for confidence in other public services", it says.

Jane Hutt allocated �4m towards tackling bed-blocking following the recommendations of the Wanless report into the Welsh health service in 2003.

Jane Hutt: Work on reducing bed-blocking 'well under way'

She says work on the problem is ongoing.

"Work is already well under way in the areas highlighted in the report.

"For example, all 22 local Wanless action plans have now been received from local health boards and are being considered," she said.

Speaking to BBC Wales, she added: "Derek Wanless said we need joined-up health and social care - that's what we have got with the local health boards.

"Let's give the health service a chance to deliver on these recommendations."

Clive Grace, director general of the Audit Commission in Wales, said: "Health services in Wales deliver a high volume of care despite considerable pressures and an inefficient configuration of services.

"Recent signs of reductions in waiting list figures are clearly to be welcomed but the current situation is a manifestation of deep seated system problems - national, local, political, managerial and clinical.

"That is why we see the responsibility for solving these problems as equally wide-ranging, and urgent.

"We want to get across how services need to change to deliver the health care system which Wales deserves."

'Damning'

Tory assembly health spokesman Jonathan Morgan said the report "completely undermines the position of Jane Hutt".

"It is highly critical of government policy and the direction of the NHS under Labour since 1999.

"On this basis, with yet another damning report into her stewardship of the health service, I fail to see how she can continue in office for any longer."

Shadow health minister, Plaid Cymru's Rhodri Glyn Thomas called Ms Hutt a "semi-detached" minister who needed to give urgent attention to health management in Wales.

"Creating different strategies in the various local health boards isn't working.