Hips are certified by the OFA (Orthopedic Foundation for Animals). The certification is done by taking a particular set of xrays of your dogs hips while it is sedated and lying on it's back. These xrays are then sent to the ofa with the appropriate paperwork. The OFA then sends these xrays around the country to three different radiographic certified vets. Each vet individually reads the xrays and grades them. They then basically average out the three grades to determine the overall grade. The grading scale top to bottom is:
Excellent, Good, Fair, Borderline, Moderate, and Severe.
Generally speaking, all dogs with the grades of Excellent, Good, and Fair are considered breedable and in some circles the borderline dogs will be bred also.
Even with these grades there is no crystal ball that will tell you what the outcome is. Two excellent dogs can throw a litter full of moderates and severes. With that said, the likelyhood is much smaller. A moderate dog has a much higher probability of throwing displastic pups than do Excellent, Good, or Fair dogs.
I know it is just heartbreaking, but this has come about from years of indiscriminate breeding practices where john doe has a male and john public has a female and there is no OFA background on either dog or their ancestors. The two owners do not take the time to do their homework and breed the pups not knowing there is some bad genes in their bloodline. Now these pups off this breeding are now grown and bred in the same manner, thus spreading this bad gene even further. This is why we should always either leave the breeding to the professionals or take the time to research and obtain knowledge before breeding.
There are treatment options, all depending on the severity of it all and the exact problems. There is always hip replacement surgery, but you can buy a truckload of new pups for what this will cost. FHO (Femoral Head Ostectomy) Which is where the ball on the end of the femor is surgically removed. Note, the dogs size is directly proportional to the success of this surgery, and if the problem is in both hips, the two sides should be done on two separate operations, giving the first time to heal. Most likely 6 months to a year apart. This surgery is relatively affordable and very very effective, since there is no longer a ball riding in the hip socket, hip displasia is no longer of consequence. Also, the dog will be able to hunt, run, play etc, but just not at normal speeds and their gate might not be so pretty.
My best advice is to get a second opinion and seek out the various surgical options through a vet. Do not race out and euthanise the dog on the opinion of the first vet. I would also talk with the breeder. If you received this dog as a replacement of another dog through a health guarantee, I would like to think you have some recourse. An attorney would be best advised to counsel you on this.
You can read more about hip displasia at www.offa.org
Also, get the ofa numbers along with the full registered name of the sire and dam and you can search the database of the OFA website and find out if the sire and dam were in fact certified.
Best of luck and let us know about the outcome.