As the burden of illness associated with hip fracture extends beyond the initial hospitalization, a longitudinal 1 year cohort study was used to analyze levels of health service use, institutional care and their associated costs, and to examine patient and residency factors contributing to overall 1 year cost. Patients in the study were aged 50 year and over, and had been admitted to an acute care facility for hip fracture in the Hamilton–Wentworth region of Canada from 1 April 1995 to 31 March 1996. Health care resources assessed included initial hospitalization, rehospitalization, rehabilitation, chronic care, home care, long-term care (LTC) and informal care. Regression analysis was used to determine the effects of age, gender, residence, survival and days of follow-up on 1 year cost. The mean 1 year cost of hip fracture for the 504 study patients was 26.527 Canadian dollars (95% Cl:​ $24.564–$28.490). One year costs were significantly different for patients who returned to the community ($21.385), versus those who were transferred to ($44.156), or readmitted to LTC facilities ($33.729) (p<0.001). Initial hospitalization represented 58% of 1 year cost for community-dwelling patients, compared with 27% for LTC residents. Only 59.4% of community-dwelling patients resided in the community 1 year following hip fracture, and 5.6% of patients who survived their first fracture experienced a subsequent hip fracture. Linear regression indicated place of residence, age and survival were all important contributors to 1 year cost (p<0.001). While the average 1 year cost of care was $26.527, the overall cost varied depending on a patient’s place of residence, age, and survival to 1 year. Annual economic implications of hip fracture in Canada are $650 million and are expected to rise to $2.4 billion by 2041.