The authors prospectively explored the consequences of hip fracture with regard to discharge placement, functional status, and mortality using the Survey on Assets and Health Dynamics Among the Oldest Old (AHEAD). Data from baseline (1993) AHEAD interviews and biennial follow-up interviews were linked to Medicare claims data from 1993-2005. There were 495 postbaseline hip fractures among 5,511 respondents aged >or=69 years. Mean age at hip fracture was 85 years; 73% of fracture patients were white women, 45% had pertrochanteric fractures, and 55% underwent surgical pinning. Most patients (58%) were discharged to a nursing facility, with 14% being discharged to their homes. In-hospital, 6-month, and 1-year mortality were 2.7%, 19%, and 26%, respectively. Declines in functional-status-scale scores ranged from 29% on the fine motor skills scale to 56% on the mobility index. Mean scale score declines were 1.9 for activities of daily living, 1.7 for instrumental activities of daily living, and 2.2 for depressive symptoms; scores on mobility, large muscle, gross motor, and cognitive status scales worsened by 2.3, 1.6, 2.2, and 2.5 points, respectively. Hip fracture characteristics, socioeconomic status, and year of fracture were significantly associated with discharge placement. Sex, age, dementia, and frailty were significantly associated with mortality. This is one of the few studies to prospectively capture these declines in functional status after hip fracture.