Department of Health chief Richard Pengelly has warned the service is "heading over the cliff edge" into a "full-blown crisis".
Speaking at a Healthcare Financial Management Association Event at the Dunadry Hotel in Co Antrim, the permanent secretary said the sector simply does not have the money to deal with the current pressures.
The stark warning comes amid spiralling waiting times and a lack of an Executive at Stormont to make key decisions.
“Yesterday, the organisation NHS Providers in England called for a full, frank and open conversation about the severe pressures facing the health service," he said.
“It said patients and taxpayers deserve honesty, realism and transparency about the scale of the challenges.
“We are certainly in a defining period for health and social care in Northern Ireland. Budgets remain under intense pressure. At the same time, demand for care continues to grow.
“Something has to give in that situation. We can see it in our growing waiting lists and the impact these have on public confidence in the system. And it’s also very evident in the rising tide of frustration within our workforce."
His statement follows the news this week that the number of people waiting for their first neurology appointment in Northern Ireland has doubled over the past four years.
One woman, Claire Espie (34), from Lisburn, was diagnosed with incurable multiple sclerosis 15 months after she was first referred to neurology services by her GP.
Waiting time targets for patients waiting to begin urgent cancer treatment have also been repeatedly missed at health trusts across Northern Ireland.
Mr Pengelly said his department had to live within its budget and difficult decisions had to be made.
"Despite our well-documented financial challenges, we are getting demands on an almost daily basis for additional spending. We simply don’t have the money to do everything we are being asked to do," he said.
“Our constant refrain is that we cannot spend money we don’t have. We need to go further than that, of course, and encourage debate on priorities and how best to use the limited resources we have.
"The way we organise services is outdated and needs to change for the sake of patients and staff.
“Change is never easy in health but it is essential. I have no doubt there will be many difficult decisions ahead both on reforming services and on budgetary choices.
“We can’t duck those decisions. If we did, then we really will be heading over the cliff edge into a full-blown crisis.”