An independent inquiry into care at the Mid Western Regional Hospital in Ennis has concluded that it is not viable as an acute hospital even with extra funding.
The report also warned it is unsafe to keep the current service operating.
The investigation by the Health Information and Quality Authority said a range of services must cease in the interests of patient safety.
These include acute and specialist surgery, critical and intensive care, maternity services, paediatric and the 24-hour Emergency Department.
Emergency services at the hospital were restricted to 8am-8pm on Monday.
Read the full HIQA report
The inquiry was set up in late 2008 following safety concerns after the deaths of two patients, Ann Moriarty and Edel Kelly, whose breast cancer was missed in tests.
The investigation team confirmed that a total of seven families took part in the inquiry.
When the investigation was announced a further five families came forward expressing concern according to the team.
Overall, the inquiry found that no single person at Ennis was fully accountable for the quality and safety of services.
A spokesperson for Ann Moriarty said that the report vindicates the family's call for an investigation but that it does not answer many questions.
Piaras MacÉinrí said that the report did not deal with the personal issues which arose in Ann Moriarty's case or the question of accountability.
He said that the family had been given to understand at a meeting with the Minister for Health that these questions would be answered.
HIQA Chief Executive Dr Tracey Cooper stressed the hospital has a significant role to pay in providing high quality care in the Mid West and the report does not recommend the closure of the hospital.
But she acknowledged the hospital will need to change the type and range of services it provides in order to ensure a better outcome for patients.
'Significant decisions have to be made and discussion needs to take place', she said.
Ms Cooper also insisted that the timing of the publication of today's report has nothing to do with any HSE agenda.
She said that the board of HIQA met this week and due to a number of factors, including the Easter break, it was decided to publish the report.
The report says not enough patients are presenting at Ennis with acute or complex conditions.
There are 65 recommendations in the report.
Among its 65 recommendations, are calls for the HSE to reorganise Ennis to develop a range of new services including diagnostic facilities, outpatients, day procedures, minor injury services and rehabilitation.
It also calls for a review of the management and governance at the Mid Western Regional Hospital, Limerick, to ensure it provides proper oversight at Ennis of the safety changes.
Minister for Health Mary Harney strongly welcomed the report.
The Minister said: 'This report is very important as it underlines the need for significant change in the way acute hospital services are organised in order to ensure a safe and high quality service for patients.
'The acute hospital reconfiguration plans currently being implemented by the HSE in the midwest Region are very much in line with the analysis and recommendations developed independently in this report.'