Why outcome-linked technology models are reshaping accountability, ROI, and revenue recovery in healthcare operations.
Dean, as the Co-Founder and CEO of Red Sky Health, you’ve seen firsthand how technology models evolve. What originally inspired you to rethink the traditional SaaS model and pursue the concept of “Service as Software”?
My inspiration came from two things – a great conversation with a Gartner analyst as well as realizing a key misalignment between a technology vendor’s success and a customer’s actual results. I ran one of the first Saas companies 25 years ago. In the traditional SaaS model, we get paid as soon as the software is deployed, regardless of whether the customer sees any value from it. I saw so many healthcare organizations buying expensive software that was underutilized or failed to solve the core problem, such as remediating denied claims, because it required so much expense and effort. The ‘Service as Software’ model seemed more relevant because we felt our success should be linked to our customers’ financial success. We wanted to talk about a model where our technology and our service became a singular, outcome-driven solution.
SaaS has dominated enterprise technology for nearly two decades. What signs have you observed in the market that indicate this model is reaching its natural limits?
The biggest challenge is the growing concern about ‘software shelfware’, basically when solutions are licensed but barely used. We’ve all seen it – someone makes a buying decision; there’s a lot of hype for a solution and then little happens post launch. In healthcare revenue cycle management, providers have purchased nearly every available tool but denied claims and revenue leakage continue to be a massive problem. The model has hit its limit because it fundamentally sells access and potential assistance, not results.
The idea of “Service as Software” reverses a long-standing mindset — paying for outcomes rather than access. How does this reshape the relationship between technology providers and their customers?
It changes the relationship from a vendor-customer aspect to a partnership. When we only get paid a percentage of the recovered revenue from denied claims, our focus is entirely on one metric: our customer’s cash flow. This means our technology, our expert claims operation team, and our incentives are 100% aligned with the customer’s bottom line. It removes the challenge of a fixed-cost contract, also eliminates the customer/vendor friction over ‘Am I paying this vendor too high a fee?’ Instead of negotiating license fees, we’re collaborating on revenue targets. It’s a transparent, performance-based relationship built on trust and a shared financial outcome, which is better for our customers, better for our partners, and better for Red Sky Health.
AI and automation are driving forces behind this shift. How do these technologies make it possible to deliver measurable business results instead of just software capabilities?
AI is the core of the engine that makes the Service as Software model financially viable. In the case of denied claims, our AI and machine learning algorithms don’t just identify a claim, they identify the root cause, provide specific changes for remediation, and can automate the workflow to refile and recover the funds. This is a key difference I want to emphasize. Traditional software that I’ve helped sell before offers capabilities to enable and assist the customer (i.e. a report, a dashboard). Our solution, which we call Daniel, uses AI to deliver the actual result known as recovered revenue. This level of automation and precision means we can operate with a very high guaranteed level of efficiency, which allows us to confidently tie our fees to the measurable, tangible business result of recovered revenue.
Many organizations still struggle to prove ROI on their software investments. How does the Service-as-Software model change the way ROI is understood and measured?
We have an ROI calculator we can use with prospects to help them to see the value of incorporating our solution into their workflow. But really, Service-as-Software basically guarantees ROI. In normal models, ROI is a complicated calculation involving internal labor costs, time-to-value, and projected savings. Our model makes it simple: your cost is a percentage of the new revenue we bring you. If you don’t recover revenue from denied claims, you don’t pay us anything. This shifts the measurement of ROI from an abstract projection to a direct, self-funding transaction. We essentially turn an operating expense into a simple, positive revenue-share equation.
Accountability seems to be at the heart of this new model. How does tying payments directly to outcomes influence how providers design, deploy, and maintain their solutions?
Accountability is critical, because it forces us to design for quick deployment and low-touch (and potentially no-touch) operation. We can’t afford a long, complex integration process because that delays revenue recovery for our customer and, of course, for us. It also influences product development by making it our priority to proactively fix bugs and improve accuracy because every denied claim that slips through the cracks is a direct loss for Red Sky Health as well. This constant, financial pressure ensures our solution is always focused on performance, accuracy, and customer outcomes, not on feature checklists, seats sold or billable hours.
In healthcare, inefficiencies in revenue cycle management have long persisted despite technological progress. How is Red Sky Health applying this model to help providers capture and retain more revenue?
We focus specifically on the most challenging part of the revenue cycle: denied claims remediation. Providers typically have a 10-15% denial rate, and a large portion of that revenue is never recovered. Our Service as Software model identifies all levels of recoverable denials, uses our AI to provide an explanation of what was wrong, automatically fixes the denied claim, and ensures payment. By only charging a percentage fee on the recovered revenue, basically the money the provider was otherwise losing, we are a net gain. We’re not selling them another tool to manage; we are literally recovering lost cash flow.
By focusing on “Revenue Optimization as a Service,” you’re introducing a results-first approach to healthcare operations. What are some of the tangible benefits your customers are seeing from this shift?
The benefits to our customers are immediate and quantifiable:
- Increased Cash Flow: Our customers consistently see a significant increase in their denial recovery rate, directly boosting their cash flow.
- Reduced Administrative Burden: We become the expert service process, removing our customers’ need to hire or dedicate expensive FTEs to the challenging and manual work of claim appeals.
- Risk Elimination: There is zero financial risk for the customer. They pay nothing out-of-pocket for our solution until and unless they recover revenue.
- Actionable Intelligence: Our AI provides insights into why claims are being denied, which our customer can also use to fix upstream processes and prevent future denials, leading to long-term revenue stability.
Transitioning from selling software licenses to selling outcomes requires a mindset change across teams and customers. How do you guide both sides through that transformation?
For us, the change is about shifting the sales mindset from being focused on closing the license deal to an outcome and performance mindset. Our success metrics are now their success metrics – revenue recovered, not software deployed. For our customers, the key is building trust through the simplicity of the contract. We explain that we are putting our expertise and capital on the line first. When they see the first few payments arrive from the insurance carrier, and they are getting recovered revenue they thought was lost, the mindset shifts from “is this software worth the cost?” to ‘why didn’t we do this earlier?’
Looking ahead, do you envision Service as Software becoming the dominant model for enterprise technology, or will it coexist alongside traditional SaaS for specific industries like healthcare?
I really believe Service as Software is the future of high-value, complex enterprise technology, and it will eventually dominate in areas where ROI is critical, and execution is a challenge. For simple, low-cost tools, like email or basic HR functions, SaaS will persist. But for core business functions like revenue cycle management, the market is demanding accountability. Customers are tired of buying potential. They want guaranteed results. Service as Software is not just an innovative model; it’s an evolution that is a need for any technology company that is wants to be confident in its ability to deliver measurable, bottom-line value. It’s been a change of mindset for me – and many in the company – and it’s a good thing!
Dean Margolis
Co-Founder and CEO, Red Sky Health
Dean Margolis is the founder and CEO if Red Sky Health, providers of an AI-driven platform designed to optimize healthcare claims remediation. Dean is an experienced entrepreneur who has successfully managed the growth of technology businesses from pure startups through acquisition and IPO. He has a proven ability to anticipate market needs and engineer product-market fit, recruit and motivate high performance teams, nurture senior-level relationships, develop successful marketing and sales programs, raise financing, and grow revenues. Before founding Red Sky Health, Dean was co-founder and co-CEO of Almond Health, a provider of a remote patient care platform that remotely tracks and analyzes vital sign data on a continuous basis to provide real-time and proactive patient care. Dean holds a master’s degree in computer science and an MBA, both from Harvard University.
Red Sky Health uses AI to fix health insurance claim denials (a $500 billion a year problem for healthcare providers). We have developed Daniel – our AI platform that utilizes Machine Learning (ML) to fix denied claims by analyzing each denial, determining what is wrong, and providing recommended actions to fix the claim so it can be re-submitted for approval and payment.
