Intuitive Surgical (ISRG), a manufacturer of robotic surgical systems, is warning of a one-two punch to growth DuDil initially warned of last year. To place more units, Intuitive Surgical launched a leasing program to give hospitals access to robotic surgical systems they otherwise might not be able to purchase. In October 2021, we warned the leasing program would slow the company’s revenue recognition. The lease announcement came on the heels of a separate initiative designed to extend the lives of surgical accessories we estimated could negatively impact yearly sales by as much as 4.3% depending on the volume and mix of procedures.

Intuitive Surgical, according to its latest 10-Q, now appears to be a victim of its leasing program success. In detailing reasons for “near-term softening” it’s experiencing in the U.S., Intuitive pointed, in part, to a reduction in the number of third generation da Vinci systems available for trade-in.

The lack of older systems makes Intuitive more reliant on hospitals leasing or purchasing newer, more expensive surgical systems. This presents another new challenge for Intuitive. Not only have these hospitals resisted becoming DaVinci robotic surgical systems customers to date, Intuitive anticipates reduced capital spending at many hospitals.

Like most, hospitals are dealing with staffing, supply chain, and rising interest rate challenges. Likewise, government funding— which insulated hospitals from the pandemic induced reduction in elective surgeries— is not expected to recur at similar levels, according to Intuitive. These and other factors caused Intuitive to warn:

“...it is likely that hospitals’ spend on capital equipment will be adversely impacted.”

HCA Healthcare (HCA), a hospital chain based in Nashville, recently slashed guidance due to rising labor costs. While Intuitive Surgical can certainly make an argument robotic surgery can help hospitals offset higher costs, convincing hospitals that have held out to this point may be a hard sell for systems that start at $2 million.