INSP Q4 Deep Dive: Reimbursement Uncertainty Shapes Outlook Despite Strong Product Adoption

Medical technology company Inspire Medical Systems (NYSE:INSP) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 12.2% year on year to $269.1 million. On the other hand, the company’s full-year revenue guidance of $975 million at the midpoint came in 2.7% below analysts’ estimates. Its non-GAAP profit of $1.65 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Inspire Medical Systems’ fourth quarter was marked by robust revenue growth and improved operating margins, yet the market responded negatively due to heightened uncertainty around reimbursement for its Inspire 5 system. Management attributed the quarter’s performance to strong patient demand, successful rollout of Inspire 5, and disciplined cost controls, with CEO Timothy Herbert highlighting “a significant increase in the fourth quarter in social media activity” and expanded physician training. However, the looming changes in procedure coding and associated professional fee reductions created caution among investors and management alike.

Looking forward, Inspire Medical Systems’ guidance for the coming year reflects management’s cautious stance amid ongoing reimbursement changes. The company expects a broad range of outcomes as it works to minimize reductions in physician fees for Inspire 5 procedures, with Herbert stating, “We plan to work with the appropriate stakeholders on initiatives intended to minimize the actual reduction applied to the professional fee.” Initiatives include advocating for a new dedicated CPT code, supporting prior authorization processes, and leveraging clinical data to drive adoption and favorable reimbursement. Management remains focused on maintaining patient access and supporting provider adoption as the reimbursement landscape evolves.

Key Insights from Management’s Remarks

Management pointed to the reimbursement transition for Inspire 5 and early signs of product superiority as central themes impacting both recent results and the year ahead.

• Reimbursement transition impacts: The company’s shift from CPT code 64568 to 64582 with a -52 modifier for Inspire 5 procedures introduces significant uncertainty, as the professional fee could be reduced anywhere from 10% to 50%, which may influence physician willingness to perform the procedure.
• Inspire 5 clinical advantages: Data from the Singapore study and U.S. limited release show Inspire 5 offers improved surgical times and higher responder rates (79.5% vs. 66% for Inspire 4), supporting continued product adoption despite reimbursement headwinds.
• Physician and center engagement: Over 90% of centers have completed Inspire 5 training, with management emphasizing ongoing support for both private practice and academic physicians to mitigate the impact of fee reductions. The company noted that academic centers, which account for about 30% of implanting surgeons, are less affected by professional fee changes due to salary-based compensation.
• WISER program and Medicare: The new government prior authorization initiative in six pilot states (WISER program) has created short-term disruptions in Medicare patient procedures, but management anticipates these technical challenges will be resolved as the year progresses.
• Cost discipline and territory optimization: Inspire Medical Systems improved margins through targeted territory consolidation and careful expense management, hiring additional field clinical representatives to better support centers and maintain high utilization rates.

Drivers of Future Performance

Inspire Medical Systems’ outlook is shaped by ongoing reimbursement negotiations, evolving coding practices, and continued product adoption.

• Reimbursement landscape in flux: The primary variable for 2026 is the final determination of the professional fee reduction for Inspire 5 procedures under the new coding regime. Management is actively engaging with payers and medical societies to minimize the impact and drive alignment, but acknowledges that a significant reduction could limit physician participation and procedure volume, especially among private practices.
• Product innovation pipeline: The planned development and future launch of Inspire 6, featuring automated sleep detection and activation, is aimed at enhancing therapy adherence and maintaining the company’s competitive edge. Management believes ongoing product improvements and expanded digital tools (such as SleepSync) will support long-term adoption despite current headwinds.
• Operational flexibility and cost control: The company plans to maintain cost discipline, adjusting marketing and territory investments as revenue trends become clearer. Management expects to drive revenue through strategic center additions and increased field support, while remaining prepared to adapt spending based on evolving reimbursement outcomes.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will monitor (1) the pace and consistency of payer adoption for the new coding and any resulting changes in physician participation, (2) the resolution of operational hurdles from the WISER Medicare prior authorization program in key states, and (3) the impact of ongoing product innovation, including Inspire 6 development and SleepSync enhancements, on maintaining patient access and provider engagement. The evolution of competitive dynamics and further clarity on reimbursement rates will also be important signposts.

Inspire Medical Systems currently trades at $63.16, down from $68.21 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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