Although their extent remains unclear, major and minor depressions are widespread in the nursing home population. This statement appears intuitively to be correct when consideration is given to the inactivity, decline in functional competence, loss of personal autonomy, and unavoidable confrontation with the process of death and dying that are associated with nursing home placement. In addition, some nursing home residents have had previous episodes of depression or are admitted to the facility already dysthymic or with other chronic forms of the illness. Such circumstances provide a favorable culture for the development and persistence of depressive illness. When the high frequency of other psychiatric disorders among nursing home residents is factored in, it is not surprising that long-term health care facilities have come to be regarded as de facto psychiatric hospitals. Nursing homes largely lack the treatment resources of psychiatric hospitals, however. Nursing home physicians are often unprepared to make psychiatric diagnoses, and a perfunctory annual psychiatric evaluation is insufficient to manage the complex depression syndromes of nursing home residents. Because nursing home psychiatrists typically work on a consultation basis, recommendations are not necessarily acted upon by the primary physicians. The consequences of undiagnosed and untreated depression are substantial. From the psychiatric perspective, the possibility that depression increases the risk for eventual development of permanent dementia highlights the importance of early identification for cases of reversible dementia. From the rehabilitation point of view, persistent depression among individuals with physical dependency following a catastrophic illness is associated with failure to improve in physical functioning. Depression can probably be linked to increased medical morbidity in nursing home residents, a relationship that also has been suggested for elderly medical inpatients. If so, the use of nursing time and other health-care facility services would be greater for depressed than nondepressed residents, and financial costs would be higher as well. Finally, recent data point to increased mortality in nursing home residents with major depressive disorder. It is apparent that depression in long-term care facilities is a condition with doubtful prognosis and negative medical, social, and financial consequences. The highest costs of all may be paid by nursing home residents who experience the unrelieved suffering of depressive illness. Only epidemiologic research using standard diagnostic criteria and direct resident assessment will adequately establish the magnitude of the need for intervention among depressed residents in long-term care.(ABSTRACT TRUNCATED AT 400 WORDS)