Mental Health Foundation chief executive Shaun Robinson said placing patients in seclusion and day rooms as bedrooms was "simply not on".
"It's a pretty appalling situation," Mr Robinson said.
"People who require residential support because they're experiencing extreme mental unwellness and distress need to be in environment that is about healing and support and safety and well-being.
"The sorts of conditions being described, in terms of over-crowding, are a long way from that kind of environment."
Mr Robinson said he applauded the Ombudsman for raising the issue.
"I think the ball is in the court of the DHB and the Ministry of Health and the Minister of Health to be working together to make sure this stops," he said.
Bay of Plenty DHB clinical director of mental health Dr Sue Mackersey said the facilities in the seclusion rooms had been used to provide people with a bed and bathroom if the unit was otherwise fully occupied at times of high demand over recent years.
"When the rooms are being used in this manner, they are in effect not seclusion rooms. Patients using these rooms in this way are not secluded and have movement throughout that part of the facility," she said.
"We are fortunate that we are one of only a few units in New Zealand where the rooms have their own en suite."
She said the facilities were clean and private with external light, and there was access to the same external environment as for other intensive-care patients.
"The patients using these rooms have access to the same level of care as others in the facility. We have systems set up to respond to higher occupancy and the effect that might have on patients, and we try to keep any impact on patients to a minimum."
Dr Mackersey said the health board had not received any complaints from patients or families about the quality of the facility.
She said patients who were using the seclusion rooms as bedrooms would stay for "the shortest period possible", which was usually a couple of days. "If the unit is otherwise fully utilised, they are still used as there is currently no alternative."
She said the service was looking into how the mental health unit could be reconfigured.
Labour Party health spokesperson Annette King said there was no easy fix.
"It's not satisfactory, but the increased demand for mental health services and the under-funding of mental health services is rife throughout New Zealand, it doesn't matter which district you look at, the demand for mental health services has gone up."
These seclusion rooms are being used as dumping grounds during busy times for overstretched services.
Green Party spokesperson for health Kevin Hague said the Minister of Health needed to launch an inquiry.
"These seclusion rooms are being used as dumping grounds during busy times for overstretched services, and it is a disgrace," he said.
"I welcome the Ombudsman's consideration of a special investigation, and I would urge the Human Rights Commission to consider doing the same."
Health Minister Johnathan Coleman referred the Bay of Plenty Times to the Ministry of Health, which was unable to comment on the issue by edition time.
The visit of Te Whare Maiangiangi was conducted on March 19, 2014 by Inspector Jacki Jones. The report found no evidence any patients had been subject to torture or degrading treatment in the six months preceding the visit.'
The report recommended the seclusion and admissions/day rooms should not be used as bedrooms when there were no beds available in the Intensive Psychiatric Care facility.
The Ombudsman would be making a follow-up visit to monitor implementation of the recommendations.
To read the report, go to www.documentcloud.org/documents/2994500-Te-Whare-Maiangiangi-Bay-of-Plenty-2014.html
