How to Operationalize Direct Contracting and Bundled Payments, With Dr. Stan Schwartz of ZERO.health

A 23-year-old roofing laborer paid $125 for a comprehensive metabolic panel — a test available directly for $6.52. That is not a healthcare problem. That is a pricing failure. And it is the origin story of ZERO.health, a direct contracting platform that gets plan members access to high-quality providers for $0 out of pocket using bundled payments.

In this episode, Stacey Richter speaks with Dr. Stan Schwartz, MD, co-founder of ZERO.health, who has been building and operationalizing direct contracting arrangements since 2014, about how bundled payments actually work in practice — what providers get, what employers get, what members get, and specifically how to solve the logistics problems that have sunk other direct contracting attempts.

WHAT YOU'LL LEARN
✅ How ZERO's bundled payment model works: a five-star Medicare hospital in Tulsa performs outpatient gallbladder surgery for $5,641 all-in — covering anesthesia, surgeon, hospital, and recovery room — compared to roughly $8,000–$10,000 through a typical claims process, with the employer covering 100% so the member pays zero

✅ Why Dr. Schwartz's mantra is "if you can schedule it, you can put a price on it" — and how this applies not just to major surgeries but to lab tests, imaging, and routine services where spread pricing adds unnecessary cost on top of already inflated prices

✅ Why the utilization concern is asking the wrong question: good evidence shows that prior authorization impedes necessary care more often than unnecessary care — and the greater financial risk for most plans is members not getting care they need, not members overconsumption

✅ How ZERO solves the double-billing and administrative chaos problem: everything is pre-arranged through personal health assistants, providers send a simple invoice or claim directly to ZERO, the member pays nothing at point of service, and double billing is easy to catch because members know they should owe zero

✅ Why Surgery Center of Oklahoma, one of ZERO's earliest providers, runs at a 10-to-1 clinical-to-administrative staff ratio versus the industry average of 2-to-1 — because bundled, direct-paid care eliminates collections, accounts receivable, and coding complexity

✅ How ZERO tracks utilization and improves it over time: in year one, roughly 30% of ZERO-eligible services actually go through the ZERO program; by years two and three, the best-performing companies reach 70% — and the gap is monitored through ongoing claims review and targeted member outreach

WHY THIS MATTERS
So much of what we call healthcare expense is pricing failure — something that should cost $7 is billed at $100, spread through an insurance mechanism, and processed with administrative overhead that can reach 30% of total plan spend. Direct contracting with bundled payments is not a new idea, but operationalizing it — training providers, educating members off open enrollment cycle, tracking missed opportunities in real time — is where most attempts fall apart. Dr. Schwartz has been doing this for over a decade. This episode is the how.

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07:59 How did ZERO.health start?

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11:04 Why does the emotional energy behind understanding how the problem of healthcare affects individuals matter in changing healthcare?

12:45 "If you can schedule it, you can put a price on it."

15:32 EP420 with Ge Bai, PhD, CPA.

16:38 EP436 with Elizabeth Mitchell.

18:21 How do employers ensure that patients and clinicians are coordinated and on board with direct contracting within their health plans?

20:26 EP475 with Peter Hayes.

22:52 Why is it important that this direct contracting system isn't mandatory for health plan members?

24:50 How does direct contracting affect excessive utilization?

26:41 EP477 (Through Line Show) with Stacey.

27:29 Why is it important that your plan benefits benefit health?

29:39 Why is it important to educate not only members but also providers who agree to participate in the program?

31:06 "It's all about simplicity."

33:11 How do you ensure plan members use the service after it is installed?