Statistics show dementia is present in 25% of all inpatients in Scotland and in around 40% of inpatients aged over 70, according to the Royal College of Physicians of Edinburgh (RCPE).
As many as 50% of the cases will be undiagnosed, meaning that at any one time an estimated 1600 people in Scots hospitals will have dementia without knowing it.
Doctors are meeting at an RCPE event to discuss how to improve diagnosis and treatment.
Dementia research professor Emma Reynish, from Stirling University, who is also a consultant geriatrician at Victoria Hospital in Kirkcaldy, said the problem of under-diagnosis is well documented in previous work.
She said: "Health boards in Scotland are doing better than elsewhere in tackling this problem. Nevertheless, older people in hospital are increasingly more likely to have dementia that is undiagnosed.
"It is vital that dementia is recognised early in order to ensure that patients and those who care for them receive appropriate treatment and care.
"When a person experiencing symptoms of confusion or memory problems is admitted to hospital, it presents an opportunity to do an initial assessment and consider the possibility it may be dementia-related."
RCPE is calling for training to evolve in order to diagnose the condition, as undiagnosed dementia can result in inappropriate care and an increased length of hospital stay.
Most acute hospitals have medicine for the elderly wards, which were formerly known as geriatric wards. However, the current structure of training "does not universally include" diagnosing and assessing cognitive disorders such as dementia.
The RCPE's Alasdair MacLullich, professor of geriatric medicine at Royal Infirmary of Edinburgh, said: "The diagnosis and assessment of dementia presents a major challenge to medical staff in hospitals who until recently have not needed to be trained in its diagnosis and treatment.
"Medical training must evolve in line with the evolving dementia epidemic to ensure that medical staff are trained in diagnosing, assessing and treating dementia. There must be sufficient numbers of trained doctors to cope with this increasing burden of disease."
Henry Simmons, chief executive of the charity Alzheimer Scotland, said: "We greatly welcome this focus on improving the rates of dementia diagnosis in Scotland's hospitals. There have been some significant improvements made to NHS training for acute staff within the Promoting Excellence framework.
"However, this still relies on staff being aware the person in question has dementia, which is currently difficult unless they have an existing diagnosis."
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