The health service in Northern Ireland is unable to cope with the rising demand for care, the audit office said.
Too many patients endured “unacceptably long” waiting times for treatment, the public spending watchdog reported.
The five main health trusts which deliver services have run up a deficit of £18 million over the last decade.
Comptroller and auditor general Kieran Donnelly said reform was urgently required.
He declared: “It is clear from the results of my audit work that the health and social care system, as currently configured, is simply unable to cope with the demands being placed on it.
“Consequently, far too many patients endured unacceptably long waiting times for treatment.
“My report makes the urgency of the reform agenda clear and emphasises the need for long-term financial planning in the health sector.”
Health service bosses recognise the need for reforming how care is delivered and have ordered further reviews into meeting the challenge of demographic change.
The ageing population with its complex health needs is putting more strain on services.
Mr Donnelly said health trusts were required to “break even” financially.
He added: “In practice, the trusts have only been able to achieve annual surpluses through being allocated an increasing amount of additional in-year funding and through implementing a series of one off, non-recurrent efficiency savings across their budgets.
“As the health and social care system faces mounting pressures and rising demand for care, the costs of maintaining existing service models are increasing at a pace which cannot be sustained within available budgets.”
The health department estimates that the underlying pressure across trusts at the start of 2017-18 was approximately £160 million.
The audit office added: “The total health and social care sector funding gap, which fully reflects inflationary and demographic pressures, the need to transform service delivery, and build additional capacity to meet population need will be significantly higher.
“Given this serious and rapidly escalating situation, the report highlights the need for substantial progress to be achieved in transforming the delivery of health and social care services.”
None of the key waiting time targets for inpatient and outpatient care, accident and emergency or cancer treatment were achieved in 2015-16 or 2016-17, although they were lowered to take account of increased demands, the audit office said.
At an individual trust level, there was only very limited success in meeting the inpatient and cancer care targets, and none achieved the standards for outpatient care or emergency treatment in either year.
Mr Donnelly added “Since we last reported, performance in respect of key waiting time targets has clearly been very disappointing.”
Expected savings in shared services are expected to be £25 million lower by 2021 than initially anticipated.
Extra money has been allocated to trusts to reduce waiting lists through additional clinics.
The audit office said the Southern Health and Social Care Trust paid almost a quarter of a million too much under the initiative, with some consultants delivering the extra work in less than the allocated time.
A statement from the Health Department said the system was not configured to prove timely care and the sustainable solution was transformation.
A total of £30 million funding has already been announced earlier this year to help clear the backlog of patients waiting for treatment.
It has helped stem the growth in waiting lists and led to a slight reduction in the total number of patients awaiting treatment.
The Department said work was progressing to deliver increased productivity through reorganisation of services.
“This includes the development of elective care centres – new standalone specialist day surgery units which have the potential to significantly improve patient access to care.”
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