Prostate cancer is the most common male cancer, with a wide range of treatment options. Payment reform to reduce unnecessary spending variation is an important strategy for reducing waste, but its magnitude and drivers within prostate cancer are unknown.In total, 38,971 men aged ≥66 years with localized prostate cancer who were enrolled in Medicare fee-for-service and were included in the Surveillance, Epidemiology, and End Results-Medicare database from 2009 to 2014 were included. Multilevel linear regression with physician and facility random effects was used to examine the contributions of urologists, radiation oncologists, and their affiliated facilities to variation in total patient spending in the year after diagnosis within geographic region. The authors assessed whether spending variation was driven by patient characteristics, disease risk, or treatments. Physicians and facilities were sorted into quintiles of adjusted patient-level spending, and differences between those that were high-spending and low-spending were examined.Substantial variation in spending was driven by physician and facility factors. Differences in cancer treatment modalities drove more variation across physicians than differences in patient and disease characteristics (72% vs 2% for urologists, 20% vs 18% for radiation oncologists). The highest spending physicians spent 46% more than the lowest and had more imaging tests, inpatient care, and radiotherapy spending. There were no differences across spending quintiles in the use of robotic surgery by urologists or the use of brachytherapy by radiation oncologists.Significant differences were observed for patients with similar demographics and disease characteristics. This variation across both physicians and facilities suggests that efforts to reduce unnecessary spending must address decision making at both levels.