Is Inspire Medical Systems (INSP) Poised for Recovery Amid Reimbursement Gains and Analyst Optimism?

The investment landscape for Inspire Medical Systems (INSP) in late 2025 is defined by a paradox: a significant Medicare reimbursement boost for its sleep apnea procedures juxtaposed with operational and legal setbacks tied to its flagship Inspire V device. This duality raises a critical question: Can the company leverage its reimbursement-driven growth potential to overcome post-launch challenges and reestablish itself as a compelling long-term investment?

Reimbursement Gains: A Catalyst for Growth

Inspire's recent Medicare reimbursement updates offer a glimmer of optimism. The Centers for Medicare & Medicaid Services (CMS) finalized the 2026 OPPS HOPD/ASC rule, increasing procedure reimbursement for Inspire's therapies to $45,000 in hospital settings and $42,000 in ambulatory surgical centers, up from $30,500 and $27,000 in 2025, respectively according to reports. This 47% increase in hospital reimbursement and 55% in ASC settings is a pivotal development, as Medicare accounts for 25%-30% of Inspire's patient base according to data. Analysts argue that higher reimbursement rates could incentivize hospitals to scale procedure volumes, potentially offsetting prior revenue declines. Piper Sandler, for instance, raised its price target for INSP to $165, citing the reimbursement boost as a "key inflection point" for the company's financial trajectory.

Post-Launch Challenges: Operational and Legal Headwinds

However, the path to recovery is clouded by persistent post-launch issues with the Inspire V device. The transition to the newer model has been marred by training delays, with many implanting centers failing to complete required onboarding processes before deployment. Compounding this, inventory imbalances have emerged, as customers retained excess stock of the older Inspire IV device, stifling demand for the newer version. These operational missteps were exacerbated by Medicare billing software delays, which pushed critical updates to July 1, 2025, further disrupting the rollout.

The fallout has been severe. Legal challenges now loom large, with lawsuits alleging that Inspire executives misled investors about the Inspire V's "operational readiness" while concealing billing software failures and inventory gluts according to disclosures. These disclosures triggered an 80% reduction in 2025 earnings per share (EPS) guidance and a 32% stock price plunge according to reports. Such volatility underscores the fragility of investor confidence, even as reimbursement gains theoretically expand the company's addressable market.

Balancing Act: Can Reimbursement Offset Operational Failures?

The interplay between reimbursement gains and operational setbacks defines Inspire's near-term outlook. On one hand, the 2026 reimbursement rates could drive procedural adoption, particularly in Medicare-eligible patients, creating a tailwind for revenue. On the other, the Inspire V's rollout challenges-rooted in poor inventory management, delayed training, and legal liabilities-threaten to erode market share and credibility.

Analysts remain divided. While Piper Sandler's optimism hinges on the assumption that reimbursement increases will catalyze procedural growth, others caution that Inspire's operational execution must improve to capitalize on this opportunity. For instance, resolving inventory imbalances and accelerating training programs could mitigate the "channel stuffing" of Inspire IV devices and restore demand for Inspire V. Similarly, addressing billing software delays-now effective July 1, 2025-could streamline Medicare reimbursements and reduce administrative friction.

Conclusion: A Tenuous Path to Recovery

Inspire Medical Systems stands at a crossroads. The Medicare reimbursement boost represents a significant tailwind, potentially unlocking growth in a market where sleep apnea treatments are increasingly reimbursed. However, the company's ability to recover hinges on its capacity to resolve operational and legal challenges that have already dented its financial and reputational capital.

For investors, the key question is whether Inspire's management can execute a turnaround that aligns with the optimism of analysts like Piper Sandler. While the $45,000 hospital reimbursement rate is a powerful lever, it will only translate into sustainable growth if paired with disciplined operational execution and transparency. Until then, the stock remains a high-risk, high-reward proposition.