566 Background: Rates of sphincter preserving surgery (SPS) have been proposed as a quality measure for rectal cancer (RC) surgery. However, administrative and registry-based SPS rates often lack critical patient and tumor characteristics, rendering it unclear if variations in SPS rates are due to unmeasured case-mix differences or selection criteria. The aim of this study was to determine whether hospitals’ SPS rates differ after accounting for clinical characteristics. Methods: As part of a RC quality project, 10 hospitals in the Michigan Surgical Quality Collaborative retrospectively collected RC-specific data from 2007-2012. We assessed for SPS predictors using multivariable regression. Patients were categorized as “definitely SPS eligible” a priori if they did not have any of the following: poor sphincter control, stoma preference, sphincter involvement, tumor <6 cm from the anal verge (an intentionally conservative cutoff) or metastatic disease. We compared hospital performance with and without these clinical data using Spearman’s correlations. Results: In total, 349 patients underwent surgery for RC in 10 hospitals (5/10 high volume and 6/10 major teaching). Of those, 74% had SPS (range by hospital 50%-91%). On multivariable analysis, only pre-op radiation, tumor location, hospital teaching status and hospital ID were independent predictors of SPS, but not age, sex, BMI, AJCC stage, ASA class, or hospital CRC surgery volume. Analyses of the “definitely eligible” patients revealed an overall SPS rate of 88% (65-100%). Hospital SPS rankings using crude versus clinically-adjusted SPS rates proved to be highly correlated (Spearman’s ρ= 0.9). Tumor locations suggest differing selection criteria for SPS in different hospitals (Table). Conclusions: Rates of SPS vary by hospital, even after correcting for clinical characteristics using detailed chart review. These data suggest missed opportunities for SPS, and refute the general hypothesis that hospital variation in SPS rates in previous studies is due to unmeasured case-mix differences. [Table: see text]