OBJECTIVES: Health care expenditure in the United States is expected to be 19.9% of GDP by 2022 and professional services account for a substantial portion of the total health care spending. The study aims to decompose the source of spending variation in professional services across Texas hospital referral regions (HRRs) due to quantity, price, health risk and cost of doing business.  METHODS: The study used 2011 professional claims data for 3,829,083 members enrolled in Blue Cross Blue Shield (BCBS) of Texas, largest commercial insurance provider in Texas. Professional claims were classified into seven categories (i.e. evaluation and management, procedures, imaging, tests, durable medical equipment, other and exceptions/unclassified) using the Berenson-Eggers Type of Service (BETOS) code and Health Care Procedure Coding System (HCPCS) procedure codes. Geographic variation in spending per capita for each category was decomposed into quantity, price, cost of doing business and health risk.  RESULTS: Overall, spending variation in professional services is mainly explained by quantity (68.5%), followed by price (19.0%), cost of doing business (8.4%) and health risk (4.1%). Across categories, variation due to price was observed to be the highest for procedures (28.2%) and evaluation and management (22.4%) categories. Quantity accounted for majority of variation for imaging (80.5%), tests (83.2%), durable medical equipment (80.9%) and other (78.6%) categories. Contribution of health risk in explaining variation was relatively small for all professional subcategories (range: 0.34% to 7.0%). CONCLUSIONS: Majority of the geographic variation in professional services spending was explained by quantity. However, contribution of quantity and price varied considerably in explaining geographic differences across different professional services. Further exploration is required in understanding factors that lead to such variations across service types.