The HSE is being warned mental health centres will be taken off the register of approved facilities unless compliance with regulations improves.
The Inspector of Mental Health Services has found 2,000 people are living in large mental health institutions, despite policies as far back as the 1980s to close them.
Some residents were also found to be sharing rooms, toilets and dining facilities.
The Mental Health Commission (MHC) says there's been improvement in services in Ireland, but issues remain around the condition of some buildings, individual care planning, risk management and staffing.
The Mental Health Commission's 2022 annual report, includes a report from the Inspector of Mental Health Services, which shows there has been an overall and continued improvement in compliance across all services when comparing pre-and post-COVID-19 pandemic figures.
However, in keeping with the MHC’s 2021 annual report, four regulations had compliance rates lower than 70%.
Chief Executive of the Mental Health Commission, John Farrelly, says "the public system can no longer ignore if the State hopes to meet what he underlines are minimum standards for the provision of mental health services to its citizens".
Mr Farrelly says poorly performing centres face not being re-registered.
"We can't continuously allow them to provide services that aren't fit for purpose, particularly the buildings.
"So what it means is that they need to make sure they're in compliance.
"We need a capital plan, a strategic plan showing that the state is going to put money into these buildings and make sure these buildings are fit for purpose".