Fragility hip fractures in the elderly are associated with high mortality and a decline in functional outcome. Vertebral fractures are the most common osteoporotic fractures in the elderly population. Data is lacking on the association between hip fracture and osteoporotic vertebral compression fracture (OVCF), particularly regarding recovery and functional outcomes. This study aimed to compare functional outcomes and short-term recovery between patients with isolated hip fracture and those with coexisting hip fracture and OVCF and to identify the prevalence of combined hip fracture and OVCF. A prospective study of hip fractures undergoing surgery by the fracture liaison service (FLS) care team were reviewed. Patient demographics and radiological assessment with a minimal two-year follow up were recorded. The patients were divided into two groups: isolated hip fracture and hip fracture concurrent with OVCF. Physical performance was measured using time up and go test (TUG) at 2 and 6-weeks follow-up. Functional outcome was assessed by Harris hip score (HHS) at 6 months and 1 year. 81 patients were included. The mean age of the patients was 78.70 years, with a male-to-female ratio of 3:7. 25 patients (30.9%) were isolated hip fracture and 56 patients (69.1%) were combined with OVCF. 46 individuals were Genant grades 1-2 and 10 individuals were Genant grade 3. Hip T-score and spine BMD in the combined group were significantly lower than the isolated group (0.64 vs. 0.70 g/cm2, p = 0.03; -1.68 vs. -0.84, p = 0.033, respectively). The 6-week TUG test was significantly lower in the isolated group (p = 0.042). The 6-month and one-year HHS were significantly higher in the isolated group compared to the combined group (82.5 vs. 77.5, p = 0.007; 87.4 vs. 80.8, p = 0.005, respectively). At the 6-month follow-up, 46 patients with mild to moderate OVCF (Genant grades 1-2) and 10 severe OVCF (Genant grade 3) demonstrated significantly lower HHS compared to those with no OVCF (grade 0) (78.0 vs. 82.5, p = 0.014; and 74.5 vs. 82.5, p = 0.012, respectively). However, there were no significant difference of HHS at one-year among the 3 groups (p = 0.056). The mean length of hospital stay was significantly shorter in the isolated group (7 days vs. 11 days; p = 0.022). A significant portion of elderly hip fractures occurred with coexisting OVCF. This combined group experienced slower functional recovery, longer hospital stays, and worse long-term outcomes compared to those with isolated hip fractures. Notably, the severity of OVCF was directly linked to poorer outcomes, highlighting the need for more attention and tailored rehabilitation programs for these patients.