Fundamental changes are needed in how care of vulnerable adults is commissioned and monitored, a report into abuse at a private hospital said.
The serious case review into events at Winterbourne View, near Bristol, comes after 11 ex-staff members admitted offences against patients.
Owners Castlebeck took "financial reward without the responsibility", the report's author Margaret Flynn said.
South Gloucestershire Council said it "fully accepted" the findings.
Castlebeck said the criticisms in the report were being "actively addressed".
The independent report also revealed concerns were raised before the abuse was uncovered in a secretly-filmed investigation by the BBC's Panorama programme.
The safety of dozens of patients was raised but the NHS was only informed about a handful of cases.
From the opening of the hospital in 2006 until 2011, there were 38 safeguarding alerts raised about 20 patients from the unit. Only one in five of those was reported to the NHS.
Three alerts the NHS does not appear to have been notified of in any way - an allegation of abuse by staff, concerns about the attitude of some staff, and an allegation of assault by a member of staff.
Peter Murphy, the head of South Gloucestershire Safeguarding Adults Board, said he wanted to convey his "deep regret" for what had happened at the hospital.
"In particular, I would like to express our regret to the hospital's patients and to their families, friends and carers," he said.
"Winterbourne View hospital should have been a safe place for them to be treated with care and compassion.
"But the hospital's owners, Castlebeck Care Ltd, failed to provide that care."
Margaret Flynn, the report's author, said Castlebeck had "promoted an unworkable management structure" and relied on "poorly paid and untrained staff".
She added the firm did not "act on the concerns, complaints of Winterbourne View visitors or patients".
The Panorama programme, aired in May last year, showed "compelling images" of patients being slapped and restrained under chairs, having their hair pulled, and being held down as medication was forced into their mouths, Ms Flynn said.
She said patients had been "traumatised and remain very distressed that they were not believed".
But she was also critical of "out of sight, out of mind" commissioning by primary care trusts when placing patients in Winterbourne View.
Castlebeck, the report added, "appears to have made decisions about profitability, including shareholder returns, over and above decisions about the the effective and humane delivery of assessment, treatment and rehabilitation".
The average weekly fee per patient was £3,500, but Castlebeck did not tell the review how this was spent.
Ms Flynn said the turnover at Winterbourne View alone was £3.7m a year.
She said the staff were "chronically bored" in their roles at the hospital, which was "poorly managed".
A spokesman for Castlebeck said: "We hope that the lessons learned and the actions that flow from this rigorous report will mark the start of a new chapter for care in our sector.
"The actions towards people with learning disabilities by former members of staff at Winterbourne View Hospital were both wholly unacceptable and deeply distressing for all concerned and we are truly sorry this happened in one of our services."
'Perceived as professionals'
He said significant changes had been made within their organisation that included extensive changes to board membership, all new operations structures, strengthened clinical governance and increased staff training and development.
"Importantly, we are determined to ensure that each of the persons for whom we care and their family are firmly at the heart of everything we do," he said.
Avon and Somerset Police were also criticised for not informing South Gloucestershire Adult Safeguarding of all their contacts with the hospital.
Det Ch Supt Louisa Rolfe, head of CID at the force, said there were 29 calls and nine incidents over a period of nearly three years relating to Winterbourne View, and agreed a pattern should have been noticed.
She said investigating officers had "overly relied on people perceived as professionals and experts in their field" at the hospital, for information.
David Behan, chief executive of the Care Quality Commission, said: "There is much for all the organisations involved with Winterbourne View to consider in Margaret Flynn's thorough and comprehensive report.
"I will ensure that the Care Quality Commission responds fully to all the recommendations for CQC.
"We will continue to work with other organisations to improve communications and sharing information to ensure we all protect those who are most vulnerable."
Dr Gabriel Scally, who chaired the NHS review panel, said: "The most striking thing - apart from the sheer horror of what was done to patients - is that even though lots of different people knew bits of what was going on, nobody put it all together and did anything about it.
"That is most disturbing.
"We should take this opportunity to look at reporting systems and make sure a system is in place so when incidents happen they are properly reported and investigated."
Anne Milton, parliamentary under-secretary of state for public health, said primary care trusts had spent money "recklessly" putting patients in Winterbourne View.
She said changes were being made to make it the responsibility of those commissioning care to ensure quality is a priority.
The report was published as two organisations warned that moving people hundreds of miles away from their families increased the risk of abuse taking place.
Mencap and the Challenging Behaviour Foundation said they had received 260 reports from families concerning abuse and neglect in institutional care since the Panorama programme was broadcast.
Eleven former workers at the private hospital have pleaded guilty to almost 40 charges of abuse and are due to be sentenced later at Bristol Crown Court.
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