Debtle: Optimizing Opportunity

By Anna Lardinois

Startup Storyteller

70 million Americans struggle to pay medical bills. A shocking 54% of personal bankruptcies are due to medical bills.

Debtle co-founder, Stephanie Hoskins, has a plan to change those statistics.

Hoskins, with over a decade of experience in corporate finance in the healthcare industry, sees an opportunity to create societal change, while protecting the bottom line of her clients. Hoskins and her co-founder Houston Hoskins have created a new payment platform that allows consumers to negotiate outstanding debt without involving collection agencies. The business to business SaaS solution provides consumers with many different options to settle unpaid bills, while allowing organizations to collect larger portions of outstanding balances than they do today.

Organizations that use Debtle empower their customers with past due bills to negotiate payment settlements on their own behalf. The transactions are completed within Debtle and are legally binding. The pilot version of the award-winning program garnered a great deal of support from its users. A second version of Debtle with additional features and a streamlined user experience is scheduled to be released at the end of January.

What is your inspiration for the creation of Debtle?

SH: I worked in healthcare finance for a decade, so I knew it was broken. But that’s what gets us excited about Debtle and that’s why we jumped into entrepreneurship.

My husband is my co-founder, so our family is all in on this. We kept saying somebody needs to create something that lets people negotiate their own debt. People should be able to buy back their own bad debt accounts directly from who they owe, instead of these debt collectors buying it for pennies on the dollar. I want to buy it for pennies on the dollar!

After a couple of years (of saying) someone needs to do that, it was like ‘us! We need to do that! We think about this. We see the problems. We can tackle this!’ And so that’s what really got us going into it. Our goal is to change the relationship that consumers have with bad debt.

What made you take the leap into entrepreneurship?

SH: My last role in corporate finance was a six-figure job with a Fortune 40 company and I loved it. It was a great job. I used to joke around with my husband, because I always did want to be an entrepreneur, but I told him I was cursed with a great job. Why would you ever leave the comfort of that? I loved my boss. It was great.

 Then I decided to go back to school for a PhD. That bounces you into poverty, basically. Then I realized, it was a little less risky. (We decided to) try to start something because we were used to that lower salary. But also, going through all the financial economics courses in the PhD program, I really started to understand a lot of the behavioral economics. And I could really pinpoint some economic theory behind the Debtle idea.

On the economic theories behind Debtle:

SH: I think most people are familiar with the idea of supply and demand in economics. That is a classic example. But most people may not realize that economics is often the study of “curves” and identifying the optimal point on the curve.  At its heart, Debtle is solving an optimization problem. If you’re an organization and you asked for zero percent of your bill, you will receive $0.00. But there are the people with bad debt who cannot pay the full amount. And if you ask (them) for 100%, you’ll get 0%. So if you imagine a curve, shaped like a rainbow, going from 0 to 0, there is an optimal point on that curve and that’s where your organization can collect the most from each person. And it is going to be different for each person.

That’s where like the machine learning comes in to analyze all of the transactions and help people try to figure out what is the optimal point for each individual to resolve this bad debt so that both parties can move forward.

(Another) classic problem in economics is asymmetric information.  That’s when one side of a transaction knows more about something than the other. And this causes a lot of breakdowns in negotiation.

For example, one thing that we saw in our customer discovery interviews, and all of our research, was that debt collectors will offer to negotiate. Those negotiations often fall through because the people (debtors) are asking the collections agencies to put it (the negotiated price) in writing first. But once you put the bad debt in writing, that becomes the new amount, whether the person pays or not. So, debt collectors won’t put something in writing until you pay, and when that happens, there’s a standoff.

Debtle is designed to eliminate this standoff and reduce other frictions in the discount or negotiation process.

One of product’s unique features is that it secures the negotiated payment from the customer before it has been accepted by the organization trying to collect the debt. If the organization declines the offer made by the consumer, the funds are released, and the negotiation can continue. This ensures that the offer to settle a balance is made in good faith and can be honored. This feature significantly reduces risk and saves time for Debtle’s corporate clients.

Another novel feature of the payment solution is that consumers are able to pay their debt in a variety of unconventional ways. In most debt negotiation, the consumer can only satisfy that debt with available cash. Debtle aims to expand the idea of accessible capital.

On alternative payment options:

SH: One of the things that’s most exciting is enabling people to pay in a variety of new and innovative ways. I’ve told people before, if you have something that’s valuable, or you can create value for society, you should be able to pay your bills with it. That drives us to explore lots of creative methods to pay.

We have a feature where you can pay with volunteer hours. We’ve teamed up with another tech company that will track the volunteer hours and confirm them and generate reports so we can easily add that into Debtle’s workflow.

We found another Fintech company that enables borrowing from friends and family. There’s also crowdfunding, and so with those two payment options the money will go straight to the organization versus going to the person first and then having them pay the organization.

We’ve implemented a payment plan feature so people can opt into payment plans. They can pay with Apple Pay and Google Pay.

If there’s a marketplace for something, there’s a way where we can tie into that marketplace and translate the good or asset to liquid funds.

Why can’t patients negotiate their own healthcare bills today?

SH: There are thousands and thousands of patients and to enable frontline staff to do an individual negotiation with thousands of people annually, it just takes up too much time. The other thing is it does open up a lot of risk for organizations. If you’re allowing people to negotiate payment without a tool like Debtle, where you can hard set the parameters, you’re giving your frontline staff the freedom to negotiate on their own and that could cause some problems.

When I sat with a call center (in her previous position) and I heard those patient calls myself, they were offering us more money than what we estimated we would get for an account or what we thought we’d get through the third party collection. So, I saw an opportunity for the organization and also a way to improve the patient experience.

How much do organizations spend when they use third party collectors?

SH: Third-party collections take 25 to 50% so and it does vary slightly by industry…If you’re outsourcing your collections, on average, they return $0.08 for every dollar. If you are selling your accounts receivable to collections where you no longer own them at all, you receive an average of $0.04 per dollar…

For us, the exciting part is helping millions of people and impacting the economy on a macroeconomic level. The way to do that is by getting the organizations and businesses on board (using Debtle). We have all of this evidence (the Debtle) will increase the amount you collect. We can decrease your overhead. We can decrease your expenses on collections. We can improve your customer service and patient experience. Those metrics are all great, but at the end of the day, the impact that we have on people is what makes this journey worth it.

At the start of the pandemic, Hoskins, with her husband and two children who at the time were ages 16 months and 8 weeks old, temporarily relocated to her parents’ home in Sheboygan County. They planned to stay four weeks, but as the pandemic stretched on, they started to consider relocating to the Midwest.

On their move to Wisconsin:

SH: My husband who’s from the South…and never lived in the Midwest.  He just fell in love with Wisconsin: Lake Michigan, the outdoor lifestyle, how clean the air is here. You know Wisconsin Nice? That’s real. The people were so nice right away, so we started to think seriously ‘could we live here

We could buy a house for half the price of our house in New Orleans and the (local) school district was amazing so we wouldn’t have to pay for private school. We could get to send our kids to a public school, which was something that’s important to us.

So, we looked into it and thought if we could give Debtle just as good, or a better chance in Wisconsin than in Louisiana, we will make the move… (we wondered) Can we meet people here? Are we going to be able to get in front of capital or potential clients? And is there a community of entrepreneurs? We realized yes right away. It was better. And at that point, we made the decision to move our family and our company.

What is next for Debtle in 2022?

SH:  Our initial (client) focus is healthcare … we’re still maintaining a focus on healthcare, but we’ve identified additional markets that we’re entering, …higher education and also utilities are very interested.

One of the tools that we’re adding is the ability to screen for financial assistance or need based programs and try to route those people to those types of community resources.  For example, only 50% of people who are eligible for the energy assistance actually get it. So, it’s really about awareness and letting people know this (resource) does exist.

To follow the progress of Debtle’s progress, follow them here

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