Waiting times have fallen significantly but further improvements could present the NHS with a major challenge, according to Audit Scotland.
Fewer patients are having to wait more than six months for surgery
The watchdog welcomed the cut in waits but said the NHS would need to become more efficient to meet the Scottish Executive's ambitious new targets.
It said executive plans to increase the number of patients with waiting time guarantees could also hamper progress.
Health Minister Andy Kerr insisted it was his job to set "tough targets".
The report showed that the number of people waiting more than six months for surgery had fallen by nearly 90% since 2001.
And figures for people waiting more than six months to see a specialist had fallen by almost 80% since 2004.
Audit Scotland commended the NHS in Scotland's "substantial progress", but said greater efficiency was needed to cut the costs involved in reducing waits.
Last year the NHS spent more than £116m on waiting time initiatives, which included using private clinics and drafting in surgeons and other medical staff for extra operations at weekends.
Yet the executive intends to press ahead with tougher targets, promising a maximum 18 week wait by the end of next year.
Mr Kerr has also pledged to scrap the controversial Availability Status Codes (ASC) to make the system more "transparent".
In June 2003, 25% of patients did not have a waiting time guarantee, having been assigned an ASC for a range of reasons such as inability to attend an appointment.
By September 2005 nearly a third of all patients were excluded from waiting time guarantees.
Holyrood SNP leader Nicola Sturgeon said Audit Scotland's report meant Mr Kerr could no longer ignore these "hidden waiting lists".
But the health minister insisted nine out of 10 ASCs were "patient-driven".
He said: "Tremendous progress has been made in reducing long waits. That's what matters to patients, not how many others are on the list."
The watchdog's report also welcomed increased activity at the Golden Jubilee National Hospital (GJNH), which was bought by the executive in 2002 to help drive down waiting times.
But it said the NHS could get "better value for money" by making more efficient use of it.
It also called for patients to be more regularly involved in decisions about where they are treated.
Mr Kerr admitted there was a "clear need" for the NHS to publicise more widely the range of choices available to patients.
Ms Sturgeon welcomed the calls for more patient choice but pointed to comments in the report on the "relatively high cost" of using the private sector.
"The private sector may provide short-term fixes for Andy Kerr, but it does so at a disproportionate cost and by taking money away from the NHS," she said.
Conservative health spokeswoman Nanette Milne said the executive's targets were a problem in themselves.
She said: "Huge pressure has been put on clinicians who are forced to treat people according to the target and not necessarily by clinical priority, which is surely in nobody's interests."