What Happened?

Shares of medical technology company Inspire Medical Systems (NYSE: INSP) jumped 15.6% in the afternoon session after the stock's positive momentum continued as a significant increase in Medicare reimbursement rate boosted the growth outlook for the company's procedures, prompting multiple analyst upgrades. 

The regulatory change is expected to increase Medicare payments to hospitals for Inspire's procedures by approximately 50%, from around $30,000 to $45,000, creating a larger margin for the company. Following the news, several analysts viewed the company more favorably. For instance, Wolfe Research upgraded the stock from Peerperform to Outperform and set a price target of $180. Adding to the positive news, healthcare stocks continued to surge following a Politico report detailing a White House plan to propose a two-year extension of Obamacare subsidies. By extending these financial aids, the White House is essentially guaranteeing sustained, high enrollment in health plans. High enrollment translates directly into stable, predictable demand for the services provided by hospitals, drug manufacturers, and medical device companies.

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What Is The Market Telling Us

Inspire Medical Systems’s shares are extremely volatile and have had 30 moves greater than 5% over the last year. But moves this big are rare even for Inspire Medical Systems and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 1 day ago when the stock gained 28.6% on the news that the Centers for Medicare & Medicaid Services (CMS) finalized a rule significantly increasing payment rates for the company's sleep apnea procedures. 

Starting in 2026, hospitals and surgical centers will receive approximately $10,000 more per procedure compared to current rates. This regulatory win is a massive catalyst for Inspire because Medicare accounts for roughly 25-30% of its patient mix. The increased reimbursement provides a strong financial incentive for hospitals to prioritize these surgeries, which should drive higher procedure volumes. Reacting to the news, Stifel upgraded the stock from "Hold" to "Buy" with a new price target of $110. Analysts noted that the company's previous struggles are turning into opportunities. Specifically, they believe that "patient warehousing", where surgeries were delayed in anticipation of better rates, will likely result in a surge of volume in 2026. With advertising spend also ramping back up, the outlook for the medical device maker has improved substantially. 

Contributing to the positive news, healthcare stocks surged after a Politico report revealed the White House plans to pitch a two-year extension of Obamacare subsidies. The proposal would extend subsidies set to expire at the end of the year, with new eligibility limits for individuals with incomes up to 700% of the federal poverty line. These subsidies, a key part of the Affordable Care Act (ACA), help lower the cost of health insurance for consumers. An extension would likely support sustained enrollment, improving the demand and growth forecasts for healthcare companies.

Inspire Medical Systems is down 29.3% since the beginning of the year, and at $133.83 per share, it is trading 37.9% below its 52-week high of $215.42 from January 2025. Investors who bought $1,000 worth of Inspire Medical Systems’s shares 5 years ago would now be looking at an investment worth $735.40.

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