Both government and private health care systems have engaged in efforts to improve quality, but the effect of these initiatives on racial and ethnic disparities has not been well studied. In the decade following an organizational transformation, the Veterans Affairs (VA) health care system achieved substantial improvements in quality of care with minimal racial disparities for most process-of-care measures, such as rates of cholesterol screenings. However, in our study we observed a striking disconnect between high levels of performance on widely used process measures and modest levels of improvement in clinical outcomes, such as control of blood pressure, blood glucose, and cholesterol levels. We also observed a gap in clinical outcomes of as much as nine percentage points between African American veterans and white veterans. Almost all of the disparity in outcomes in the VA was explained by within-facility disparity, which suggests that VA medical centers need to measure and address racial gaps in care for their patient populations. Moreover, because cardiovascular disease and diabetes are major contributors to racial disparities in life expectancy, the findings of this study and others underscore the urgency of focused efforts to improve intermediate outcomes among African Americans in the VA and other settings.