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.