Some detained patients are being placed and held in inappropriate institutions, a study of mental health services finds.
A review of mental health services in Wales has found that some detained patients are being placed and held in inappropriate institutions.
A lack of beds, escalating costs, poor communication and funding disputes in the service were blamed by the report.
The BBC's Dragon's Eye programme also claimed a bid for more assembly powers over mental health was being held up.
An assembly government spokesperson said it would consider responses to the study before deciding what to do.
The independent study was ordered by the assembly government following two deaths involving mental health patients.
Secure mental health services fall into three categories - high, medium and low - and patients detained under the Mental Health Act should be sent to the appropriate level of care.
But the report said there were several Welsh patients who were being treated in high security institutions who did not require this level of care.
They are stuck there not because of safety but because of lack of provision of lower cost, more effective community based services
Bill Walden-Jones, chief executive Hafal
But they could not move because of delays in relocating them to lower security facilities, and because there is no dedicated medium secure facility in Wales for the treatment of personality disorder.
The chief executive of mental health charity Hafal, Bill Walden-Jones, said: "Underlying the whole report is the fundamental problem that people are blocked in the wrong level of security - that is to say that people are in expensive high secure facilities who could move down perfectly safely and in part there are large numbers of people stuck in medium secure who could be moved to lower safety services.
"They are stuck there not because of safety but because of lack of provision of lower cost, more effective community based services - it's a daft situation."
The report also strongly recommends that patients from south Wales needing high security care should no longer be sent to Ashworth on Merseyside, but instead to Broadmoor in Berkshire - although this would require a reorganisation of English catchment areas.
A spokesman for Wales' Health Minister Edwina Hart said the study is out for consultation until 21 August.
"We will then consider the responses carefully in determining the way forward."
Ms Hart has also admitted that the key One Wales commitment to eliminate the use of the private sector in the NHS in Wales by 2011 may not be achievable.
She was responding to a number of experts who told the Dragon's Eye programme that secure mental health services in Wales is completely reliant on private companies supporting public provision, and that very significant extra capital investment would be needed if the NHS were to have any chance of providing the vital services without the use of the private sector.
A spokesman for Ms Hart said that although investment was under way to increase NHS capacity for mental health treatment, the specialised nature of secure mental health services meant that the 2011 target might not be achievable in this area.
Conservative AM Jonathan Morgan said he was frustrated his proposals for new powers for the assembly in mental health had still not made their way through Westminster.
"What I'm asking for is for Parliament to devolve power to the assembly to allow us to legislate in order to provide quicker access to assessment, to provide more consistent access to treatment and care, and to provide independent advocacy for people with a mental illness in Wales," he said.
"It's a huge job of work for us to get on with. I'm annoyed and frustrated that we're being held up by Parliament processing government legislation ahead of this particular piece of legislation."
A spokesperson for the Wales Office said: "The government hopes to present Mr Morgan's proposed LCO (Legislative Competence Order) to Parliament shortly for pre-legislative scrutiny."
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