A hearing aid system provides acoustic modulation of the fluid within the cochlea of the inner ear corresponding to a first frequency range of sensed acoustic signals, e.g., lower-to-middle frequencies of the audible range, and electrical stimulation of the cochlea corresponding to a second frequency range, e.g., high frequencies of the audible range. In a preferred implementation, a short electrode/transducer array is provided for use with the hearing system. Such array is adapted to be inserted into the basal region of the scala tympani of the cochlea. The electrode/transducer array includes a plurality of spaced-apart electrode contacts through which electrical stimulation is provided to stimulate ganglion cells located in the basal region of the cochlea, which cells are responsible for perceiving the higher frequencies of the acoustic energy. The electrode/transducer further includes an acoustic modulator as an integral part thereof, in fluid communication with an acoustic transducer, through which acoustic modulation may be coupled to the fluid within the cochlea, thereby allowing normal hearing processes to occur in the cochlea. In the preferred implementation, the lower frequencies of sensed acoustic energy are processed to provide modulation of the acoustic modulator. An implantable cochlear stimulator (ICS), including the acoustic transducer and coil, and implantable speech processor (ISP), including an implantable microphone, are used with the system. In an alternative embodiment, the acoustic modulator within the electrode/transducer array is used as a sensor, to sense fluid modulation within the cochlea resulting from a functioning middle ear, and the acoustic transducer converts such sensed fluid modulation to electrical signals, thereby providing the function of an microphone implanted in the cochlea.