Current race/ethnicity categories established by the U.S. Office of Management and Budget are neither reliable nor valid for understanding health disparities or for tracking improvements in this area. In Hawaii, statewide hospitals have collaborated to collect race/ethnicity data using a standardized method consistent with recommended practices that overcome the problems with the federal categories. The purpose of this observational study was to determine the impact of this collaboration on key measures of race/ethnicity documentation. After this collaborative effort, the number of standardized categories available across hospitals increased from 6 to 34, and the percent of inpatients with documented race/ethnicity increased from 88 to 96%. This improved standardized methodology is now the foundation for tracking population health indicators statewide and focusing quality improvement efforts. The approach used in Hawaii can serve as a model for other states and regions. Ultimately, the ability to standardize data collection methodology across states and regions will be needed to track improvements nationally.