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Background Dementia increases the risk of adverse outcomes during hospitalisation, underscoring the need for system-level strategies. In 2016, Japan introduced Dementia Care Add-on 1 (DCA1), a financial incentive requiring hospitals to establish multidisciplinary dementia care teams. The short-term impact of DCA1 has been elucidated; however, its potential for medium-term to long-term benefits remains uncertain. In this study, we aimed to evaluate the medium-term to long-term impact of DCA1 on care processes and patient outcomes in older adults with dementia in acute-care hospitals.Methods Patients aged ≥65 years with moderate-to-severe dementia who were admitted to acute-care hospitals between April 2014 and March 2020 were identified using a nationwide inpatient database. Hospital-level propensity score matching was conducted, followed by a difference-in-differences analysis comparing identified inpatients of DCA1-certified and non-certified hospitals. Outcome measures were length of stay (LOS), activities of daily living maintenance, potentially inappropriate medication prescriptions, in-hospital fractures and home discharge. A sensitivity analysis excluding hospitals certified only for the less stringent DCA2 scheme was conducted.Results Overall, 309 791 patients from 235 matched hospital pairs were analysed. DCA1 certification was not associated with improvements in the measured outcomes. Notably, >60% of DCA1 hospitals billed for <20% of eligible patients, indicating limited and inconsistent implementation. In a restricted analysis excluding DCA2-certified hospitals, DCA1 certification showed a statistically significant reduction in LOS (change: −11.3%; 95% CI –19.8% to –3.0%). No significant associations were observed for the other outcomes.Conclusions DCA1 was not associated with measurable improvements in patient outcomes at the certification level. However, under more homogeneous comparison conditions, an association was observed with shorter LOS. These findings show that structural certification alone may be insufficient to achieve consistent improvements in dementia care outcomes in acute hospital settings.