The watchdog has told Linden House, a 97-bed medium-and-low-secure hospital in Market Weighton, to make changes to the safety and quality of services after it carried out two inspections in September and December last year.
The Commission issued enforcement notices ordering improvements and warned that it would take "stronger action" if necessary.
Failings found by the September inspection were that Linden House had not met standards relating to the risk assessment of patients, seclusion of patients and handling of medicines.
Errors were also found in the way it kept confidential information, staffing levels, staff training and meeting the needs of patients with learning disabilities.
Linden House was inspected again in December to check progress, but it had failed to respond to all concerns, in particular the failure to investigate or review policies on the administration of drugs. As a result a third notice was issued.
Nigel Ellis, the Commission's head of investigations, said; "The situation that we found in September at Linden House was unacceptable and potentially put the safety of patients at risk."
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