The optimal treatment for displaced femoral neck fractures in elderly patients is a matter of controversy. Four surgical options are well supported in the orthopaedic literature: reduction with internal fixation, unipolar hemiarthroplasty, bipolar hemiarthroplasty, and total hip arthroplasty. Based on a review of the outcomes literature regarding treatment of femoral neck fractures and a cost-effectiveness analysis, an algorithm for surgical treatment of displaced femoral neck fractures in elderly patients is presented. Cost-effectiveness analysis of these four surgical treatment options shows that arthroplasty is the most cost-effective treatment when complication rate, mortality, reoperation rate, and function are evaluated during a 2-year postoperative period. These data were strongly supported by a two-way sensitivity analysis that varied the effectiveness of the interventions and the costs. Literature derived outcome studies show that elderly patients with displaced femoral neck fractures achieve the best functional results with a well healed femoral neck without osteonecrosis after reduction and internal fixation. Achieving this result may be difficult, and it is not as cost effective as arthroplasty.