Aims The assessment of functional status is a more appropriate measure in the older people than traditional healthcare outcomes. The present study aimed to analyse the association between functional status assessed using the Barthel Index and length of stay, in‐hospital mortality, discharge destination, and Diagnosis‐Related Groups‐based cost. Design This study was a retrospective study that used administrative data from patients older than 65 discharged from the University Hospital of Padua (Italy) in 2016. Methods A logistic regression model for categorical variables (length of stay, in‐hospital mortality, and discharge destination) and a generalized linear model with gamma distributions and log links for continuous variables (cost of hospitalization) were used to evaluate associations with the Barthel Index. Results A total of 13,484 admissions were included in the analysis. In‐hospital mortality, safe discharge, and length of stay were higher in patients with severe dependence than in patients with mild/no dependence with a 12‐fold increased risk of death (OR = 12.81; 95% CI 9.22–18.14), a 4 times greater likelihood of safe discharge (OR = 4.64; 95% CI 3.96–5.45), and a 2‐fold increase in length of stay (OR = 2.56; 95% CI 2.34–2.81). On the other hand, no significant association was found between the cost of hospitalization and the Barthel Index. Conclusions Barthel Index was strongly associated with in‐hospital mortality, discharge destination, and length of stay. The costs of hospitalization, however, were not related to patients’ functional impairment. Impact The study considers functional status as an indicator of hospital outcomes. Better comprehension of the relationship between functional status and healthcare outcomes may help with early and adequate healthcare planning and resource management.