Baird and Wells Fargo have each downgraded shares of Inspire Medical Systems, pointing to growing ambiguity around physician reimbursement following recent coding adjustments and a more cautious revenue outlook for 2026.
Bairds move and reasoning
Baird lowered its recommendation to "neutral," saying that recent developments on reimbursement have clouded visibility into how utilization and new account growth will evolve. The firm stated it will be difficult to justify a higher valuation multiple until Inspire demonstrates a clearer route back to stable, faster growth.
Wells Fargos action
Wells Fargo dropped its rating from "overweight" to "equal weight" and cut its price target to $70 from $145. The downgrade reflects ongoing uncertainty tied to physician fees as Inspire rolls out its Inspire V system.
Quarterly results and margin trends
Inspire reported fourth-quarter revenue growth of 12% year over year and delivered earnings of $1.65 per share, both of which beat expectations. The companys operating margin was roughly 17.5%, an improvement of more than four percentage points versus the year-ago quarter. Management attributed the margin expansion to slower expense growth and improved gross margin, partly driven by a greater contribution from Inspire V.
Revised 2026 guidance and reimbursement mechanics
Management reduced the companys 2026 revenue-growth outlook to a range of 4% to 10%, down from an earlier view of about 10% to 11%, explicitly citing reimbursement changes as the reason.
The company explained that the adoption of a new CPT code carrying a -52 modifier could lower physician payments by between 10% and 50%, depending on how regional Medicare contractors set rates. The low end of Inspires internal revenue-growth forecast assumes an average 50% reduction in physician reimbursement, while the high end assumes a 10% impact.
Implications for volumes, account openings and profitability
Analysts warned that this reimbursement uncertainty could weigh on procedure volumes and slow the pace of new account openings, especially at centers that are more sensitive to reimbursement levels. Despite those headwinds, the company expects to remain profitable and guided to operating margins in the range of 6% to 8% for the period referenced.
Wells Fargo additionally noted that some physicians may continue using Inspire IV, which is not subject to the same modifier-related reimbursement risk, and that behavior could constrain near-term demand for the newer Inspire V system.
Key takeaways
- Baird and Wells Fargo downgraded Inspire amid reimbursement uncertainty tied to coding changes and a reduced 2026 growth outlook.
- Inspire beat Q4 expectations with 12% revenue growth and $1.65 EPS; operating margin improved to ~17.5%.
- Management now projects 2026 revenue growth of 4% to 10%, with potential physician payment reductions of 10% to 50% depending on regional Medicare contractor decisions.
Risks and uncertainties
- Unclear physician reimbursement under a new CPT code with a -52 modifier could materially reduce payments and depress procedure volumes.
- Slower new account openings at centers sensitive to reimbursement could impede adoption and near-term revenue growth.
- Shift by physicians to the older Inspire IV system, which lacks the modifier-related reimbursement risk, may limit demand for Inspire V in the near term.