The UK Care Quality Commission (CQC) has urged Victoria House (Wallasey) Limited to take necessary measures to comply with essential standards of quality and safety.
Inspectors, who visited Victoria House on 7 March and 9 March 2012, found that the provider was not meeting six essential standards.
Ann Ford, head of CQC Compliance for the northwest said the failings at Victoria House are a real concern and improvements need to be made quickly.
"CQC has been working closely with the local authority to ensure the safety and wellbeing of people receiving this service and we have told the provider where they need to improve," Ford added.
"Where improvements are not made we have a range of enforcement powers that can be used, including prosecution, closure or restriction of services."
The four major areas of concern identified by inspectors include safeguarding people from abuse, care and welfare of people, medicines management and assessing and monitoring service provision.
CQC inspectors reported that the care plans at the house did not reflect individual needs and lifestyle options, and appropriate measures were not taken to ensure that the residents were safeguarded from the risk of abuse.
During their visit, they also identified improper management of administration of medicines, concerns related to respect and involvement of people using the service, and requirements relating to workers.