BACKGROUND: Sphincter-preserving surgery (SPS) has been proposed as a quality measure for rectal cancer surgery. However, previous studies on SPS rates lack critical clinical characteristics, rendering it unclear if variation in SPS rates is due to unmeasured case-mix differences or surgeons' selection criteria. In this context, we investigate the variation in SPS rates at various practice settings. METHODS: Ten hospitals in the Michigan Surgical Quality Collaborative collected rectal cancer-specific data, including tumor location and reasons for non-SPS, of patients who underwent rectal cancer surgery from 2007 to 2012. Hospitals were divided into terciles of SPS rates (frequent, average, and infrequent). Patients were categorized as 'definitely SPS eligible' a priori if they did not have any of the following: sphincter involvement, tumor <6 cm from the anal verge, fecal incontinence, stoma preference, or metastatic disease. Fixed-effects logistic regression was used to evaluate for factors associated with SPS. RESULTS: In total, 329 patients underwent rectal cancer surgery at 10 hospitals (5/10 higher volume, and 6/10 major teaching). Overall, 72 % had SPS (range by hospital 47-91 %). Patient and tumor characteristics were similar between hospital terciles. On multivariable analysis, only hospital ID, younger age, and tumor location were associated with SPS, but not sex, race, body mass index, American Joint Committee on Cancer (AJCC) stage, preoperative radiation, or American Society of Anesthesiologists (ASA) class. Analysis of the 181 (55 %) 'definitely-eligible' patients revealed an SPS rate of 90 % (65-100 %). CONCLUSIONS: SPS rates vary by hospital, even after accounting for clinical characteristics using detailed chart review. These data suggest missed opportunities for SPS, and refute the general hypothesis that hospital variation in previous studies is due to unmeasured case-mix differences.