BackgroundAccurate and timely diagnosis of dementia is necessary to allow affected individuals to make informed decisions and access appropriate resources. When dementia goes undetected until a hospitalization or nursing home stay, this could reflect delayed diagnosis or misdiagnosis, and may reflect underlying disparities in healthcare access.MethodsIn this retrospective cohort study, we used 2012–2020 Medicare claims and other administrative data to examine variation in setting of dementia diagnosis among fee‐for‐service Medicare beneficiaries with an initial claims‐based dementia diagnosis in 2016. We used multinomial logistic regression to evaluate the association of person and geographic factors with diagnosis location, and Cox proportional hazards regression to examine 4‐year survival relative to diagnosis location.ResultsAmong 754,204 Medicare beneficiaries newly diagnosed with dementia in 2016, 60.3% were diagnosed in the community, 17.2% in hospitals, and 22.5% in nursing homes. Adjusted 4‐year survival rates were significantly lower among those diagnosed in hospitals [−16.1 percentage points (95% CI: −17.0, −15.1)] and nursing homes [−16.8 percentage points (95% CI: −17.7, −15.9)], compared to those diagnosed in the community. Community‐diagnosed beneficiaries were more often female, younger, Asian or Pacific Islander, Native American or Alaskan Native, Hispanic, had fewer baseline hospitalizations and higher homecare use, and resided in wealthier ZIP codes. Rural beneficiaries were more likely to be diagnosed in hospitals.ConclusionsMany older adults are diagnosed with dementia in a hospital or nursing home. These individuals have significantly lower survival than those diagnosed in the community, which may indicate diagnosis during an acute illness or care transition, or at a later disease stage, all of which are suboptimal. These results highlight the need for improved dementia screening in the general population, particularly for individuals in rural areas and communities with higher social deprivation.