Objective To identify the most appropriate imputation method for missing data in the HCUP State Inpatient Databases (SID) and assess the impact of different missing data methods on racial disparities research. Data Sources/Study Setting HCUP SID. Study Design A novel simulation study compared four imputation methods (random draw, hot deck, joint multiple imputation [MI], conditional MI) for missing values for multiple variables, including race, gender, admission source, median household income, and total charges. The simulation was built on real data from the SID to retain their hierarchical data structures and missing data patterns. Additional predictive information from the U.S. Census and American Hospital Association (AHA) database was incorporated into the imputation. Principal Findings Conditional MI prediction was equivalent or superior to the best performing alternatives for all missing data structures and substantially outperformed each of the alternatives in various scenarios. Conclusions Conditional MI substantially improved statistical inferences for racial health disparities research with the SID.