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Background: Circumferential resection margin (CRM) status is an important predictor of outcomes after rectal cancer operation, and is influenced not only by operative technique, but also by incorporation of a multidisciplinary treatment strategy. This study sought to develop a risk-adjusted quality metric based on CRM status to assess hospital-level performance for rectal cancer operation.Study Design: We conducted a retrospective observational cohort study of 58,374 patients with resected stage I to III rectal cancer within 1,303 hospitals who were identified from the National Cancer Database (2010 to 2015). The number of observed cases with a positive CRM (≤ 1 mm) was divided by the risk-adjusted expected number of cases with positive CRM to form the observed-to-expected (O/E) ratio. Secondary endpoint was overall survival.Results: The overall rate of CRM positivity was 15.9%. Based on the O/E ratio for 1,139 hospitals, 147 (12.9%) and 103 (9.0%) were significantly worse and better performers, respectively. The majority of hospitals (n = 570) performed as expected. Positive CRMs using criteria of 0 mm and 0.1 to 1 mm were associated with a significantly shorter 5-year overall survival of 49% and 63.5% (hazard ratio 1.67; 95% CI, 1.57 to 1.76 and hazard ratio 1.19; 95% CI, 1.12 to 1.26) than negative CRM > 1 mm of 74.1% (all p < 0.001).Conclusions: CRM-based O/E ratio is a robust hospital-based quality measure for rectal cancer operation. It allows facilities to compare their performance with that of centers of similar characteristics and helps identify underperforming, at-risk, and high-performing centers. National quality-improvement initiatives for rectal cancer should focus on ensuring high-quality data collection and providing ready access to risk-adjusted comparative metrics. [ABSTRACT FROM AUTHOR]