By the time Dr. Valery Portnoi first met the patient, the 81-year-old man knew his name, but not his age. The man did not know he was in a hospital, Portnoi recalled later. He knew he was married, but could not give his wife's name. He was strapped to the bed and incontinent.

The man had run a real estate business before his condition deteriorated, and his disorder had been diagnosed as Alzheimer's disease, an incurable deterioration of the brain that is also known as presenile dementia. If the diagnosis was right, not much could be done for him.

But Portnoi, a director of geriatric medicine at George Washington University Medical Center, disagreed with the diagnosis. He concluded after interviewing the patient, his wife and a friend, also a physician, that the man was not suffering from Alzheimer's at all but from depression -- a treatable, curable illness. Within a matter of months after treatment began, the patient was able to resume living a normal, active life.

Although unusually dramatic, this case is not exceptional. Increasingly, physicians treating older persons are finding that what appear to be organic mental deterioration or physical problems that defy treatment turn out on closer examination to result from depression.

In some instances, the depression may result from a significant event in the person's life. In other cases, however, the depression may result from drugs the patient is taking or from biological changes that occur in the brain.

Portnoi and other doctors say that most physicians have only recently begun to recognize the role severe depression can play in the illnesses of older patients. The particular phenomenon of depression masquerading as dementia has not been widely studied, but a 1979 British study found that 31 percent of ailments diagnosed as dementia in that country were misdiagnosed.

Portnoi wrote a year ago in a medical journal that "there is reliable evidence to support the idea that dementia is even more overdiagnosed in the United States," where 2.5 million to 3 million persons 65 or older are currently thought to be suffering from some form of that disease, than in Britain.

According to another estimate in an American Journal of Psychiatry article this year, between 8 and 15 percent of cases diagnosed as dementia turn out to be depression that can be completely reversed.

Portnoi said he became aware of depression as a problem of the elderly when he encountered numerous aged patients who complained of ailments even though he and other physicians could find no apparent physical cause for these symptoms.

He estimates that 30 to 40 percent of the 500 elderly patients he has seen in the last three years were suffering from depression. However, he notes that his patients are not typical because many are referred to him after other doctors have failed to discover a cause for their problems.

Depression is a common psychological malady. Everyone suffers from at least mild depression at one point or another. In most instances, it is self-correcting: the depressed person "snaps out of it" without professional help. In some cases, when the depression is extended or severe, medical and psychological intervention may be necessary.

Left untreated, depression can be severe and permanent. Misdiagnosed, the symptoms can become worse.

The symptoms of serious depression, as they appear among elderly persons, include long-lasting difficulty sleeping, loss of appetite, loss of energy, sluggishness, slowed thinking and loss of interest in usually pleasurable events. In addition, depressed persons may show signs of inappropriate guilt and have recurrent thoughts of suicide. Complaints about physical problems for which a physician can find no clear cause -- described as "phantom symptoms" by Portnoi -- are not uncommon.

Dr. Neal Cutler, a psychiatrist and chief of the section of brain aging and dementia at the National Institute on Aging, recalled being asked to see a woman in her 60s who had been described as "dying" by her physician. The woman was emaciated, suffering, among other things, from anorexia. Cutler diagnosed the woman's problem as depression and prescribed antidepressant medication.

Within a week to 10 days, he said, the woman's condition began improving, her weight picked up and she became responsive to her surroundings. After years of living in a nursing home, she was able to return to her family several months later.

Depression is overlooked as a problem among the elderly, Cutler said, because the symptoms can be explained away. "The notion is that as you get older, you get slower."

Until recently, the conventional wisdom viewed depression as a hallmark of old age. Dr. Frederick K. Goodwin, a psychiatrist and scientific director of the National Institutes of Mental Health, takes the opposite view. Depression, Goodwin said, is an aberration in the elderly.

"There's no reason to assume that being old brings depression. That isn't so," he said. "We shouldn't write them off by saying that of course you're depressed when you're old. That's an insult to old people. Not only is it an insult, it isn't true."

In fact, Goodwin and his brother, James, who is chief of gerontology at the University of New Mexico School of Medicine, point out that depression in the elderly often turns out to result from drugs taken to deal with physical problems.

Part of the difficulty is that older persons do not necessarily react to drugs in the same way as younger adults. "For many years pediatricians have been taught in medical schools that children are not small adults," James Goodwin said. "The point that geriatricians are trying to make is that old people are not old adults, and they react as differently to drugs compared to young adults as children do."

It may take four times as long for a drug to metabolize in a 70-year-old as in a 20-year-old, according to James Goodwin. If the physician prescribing drugs fails to take these slower metabolism rates for older persons into account, the result can be sluggishness, lethargy, disorientation and depression, he said.

Certain drugs prescribed for arthritis, a common enough problem among the elderly, are known to produce symptoms of dementia, James Goodwin said. "This was something that wasn't picked up for some time." Drugs that can cause depression include reserpine, methyl-dopa and others prescribed for high blood pressure.

Misdiagnosis may lead the physician to prescribe the wrong drugs, aggravating the problem. If, for example, a depressed patient is having trouble sleeping -- a symptom of depression -- a physician may improperly prescribe a tranquilizer to aid sleep. Tranquilizers may allow the patient to sleep, but may deepen the depression.

Elderly persons with a variety of problems may also be treated by a number of physicians, each of whom could be prescribing medication without any one of them looking to see how the drugs may interact with one another. In some instances, little or nothing is known about drug interaction.

"Often what's needed," according to Frederick Goodwin, "is for someone to stop and say, 'Wait a minute. Let's take a complete look here.' "

Both Frederick Goodwin and Portnoi agreed that in most cases of elderly depression some combination of drug and psychotherapy will probably benefit the patient. Portnoi said that in many cases latent psychological problems that an elderly person has been able to keep under control may appear when a physical infirmity develops. In such cases, Portnoi and Goodwin agreed, drug therapy may be needed to break the downward spiral, but then psychotherapy is indicated to help the patient confront the underlying problem.

Older persons often find it difficult, however, to find psychiatrists willing to take them on as patients. Older psychiatrists, Goodwin said, who are not familiar with new drug developments may not feel comfortable treating older patients, especially since these older patients may have other medical problems.

A "more subtle psychological bias," Goodwin said, is that older persons are seen as becoming more rigid in their behavior and less amenable to change. "I think there's some truth in it. If you state as your goal fundamental changes in a person's personality, then it is more difficult to change older people." But if coping is the goal, "old people respond as well to a focused program as young people do."