A committee of Welsh politicians has discovered that many neonatal units for ill and premature babies are crowded and under-staffed.
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The cross-party Health, Wellbeing and Local Government Committee found a high quality of NHS care for babies and parents, but “against the backdrop of a severe funding shortfall”.
There are not enough specialist staff members in the centres and ongoing problems recruiting nurses and doctors, the concluding report argues.
It said pressure on services was likely to increase because of a rising birth rate, an increasing number of low-birthweight babies and medical advances in the treatment and survival rate of premature babies.
Of the 33,000 babies born in Wales every year an estimated 3,800 are admitted to the countyry’s 13 neonatal units.
The committee called for an official review of the unit’s capacity and said the Assembly Government should pay particular attention to the birth rate when assessing demand on the service in future.
Risk factors associated with prematurity - such as obesity among mothers, deprivation, assisted conception and older and younger mothers - were also on the rise, the report said.
The inquiry was prompted by concern from constituents and campaigners, despite the promise of Assembly Government funding in 2008.
The British Association of Perinatal Medicine (BAPM) recommends a nurse-to-baby ratio of 1:1 for babies requiring intensive care, 1:2 for babies needing high-dependency care, and 1:4 for special care babies.
Although the Assembly Government endorses the guidelines, AMs heard evidence suggesting standards were not being met, especially in intensive care.
Critical demand increased, specifically for neonatal surgery which is only available in Cardiff.
The committee said the Assembly Government should ensure the staff ratios were met, but not by simply cutting the number of cots.
Units are recommended to aim for an occupancy rate of 70%, but a survey by the charity Bliss found 38% of units exceeded full capacity at some point in 2007.
Committee chairman Darren Millar said: "The birth of a child is a magical, miraculous event, but if a baby is born too early, it can be an extremely difficult, emotional and stressful time for a family.
“All babies deserve the best possible start in life, and the care that premature babies receive can have a profound effect on the rest of their lives.”
In a statement, the charity Bliss said it welcomed the report and said there should be no delay in taking action.
It said the findings showed little progress has been made since a set of standards for neonatal services was published in December 2008.
“The report highlights that neonatal services in Wales have been under-resourced for many years and they do not meet the needs of newborn babies or their families” it said.
Bliss said families were put under extra financial, emotional and practical pressure when babies were transferred between units.
It added: “It is clear that extra investment is urgently needed to ensure minimum staffing levels are met, that a dedicated transport service is introduced and that a high level of support forparents is implemented.”
An Assembly Government spokesman said: “We have received a copy of the report and will consider its findings and recommendations.”