Economy

Fear the Reaper: The Cost Of Death Is Soaring

November 16th 2014

By:
Andrew Friedson

What happens to us after we die? I know what you’re thinking -- that’s a pretty loaded question, especially if you’re in your twenties, right? Yes, it is, though likely not in the way you were considering. You may not realize that a small number of people are literally getting “loaded” off death, and in some cases, at the expense of bereaved families. A $16 billion industry, there’s a heckuva living to be made off of dying. 

Coffins, embalming, and internment aren’t exactly your garden variety dinner topics, but the lack of competition in the death-care industry affects us all. Admittedly, it may seem odd to ponder the end-of-life business when you’re just trying to launch your career or start adulthood. But the death industry is a critical one to explore for the following reason: 

In 1960, when virtually all funeral homes were small, independent businesses, funeral related expenses averaged about $700 per person. Today, they average more than $8,000 for basic amenities and services, and a casket alone can cost more than $10,000 itself.

So what’s the problem with savvy businesses competing to make money based on their ability to provide services effectively? Nothing, actually. The problem is that there isn’t much competition at all. The days of Harry Sultenfuss (Dan Akroid) running a small, community funeral home out of his house like we saw in My Girl, have been been eliminated at the heavy hands of huge publicly traded conglomerates like Service Corporation International (SCI).

What Exactly is SCI? 

SCI may be more familiar to you as Kroehner Service Corp., when it was portrayed as the subject of HBO’s Six Feet Under. Think of SCI as the Wal-Mart of the death-service business. The difference here is that Wal-Mart has systematically put “mom and pop” corner stores out of business because of their cheap prices that undercut small stores who generally lack their economies of scale and sophisticated distribution network (not to mention exceptionally low wages). The opposite is true in the death care business, though, where a series of mergers and acquisitions have effectively limited competition in local markets while driving related funeral costs way up, not down. Remember, this is a business where geography matters. Although you can now buy comparatively inexpensive caskets at places like Costco and on Amazon.com, caring for, preparing and burying a recently deceased body happens locally, and with all the consolidation in the death industry, there aren’t enough choices in many areas. Similarly, in the immediate aftermath of losing a loved one, a family isn’t inclined to shop around, so the opportunity for price gouging is ripe.

A Monopoly on Death?

Last year, SCI struck a deal to purchase the second largest funeral provider in the country, Stewart Enterprises, Inc.  Amid vocal opposition from communities that would be left with virtually no competition, the Federal Trade Commission raised concerns that the deal could allow SCI “unilaterally to raise prices charged to consumers in these local markets and would substantially increase the risk of collusion between SCI and the few remaining competitors in the affected local areas.” As a result, the FTC has based their conditional approval on the merged company divesting from 53 funeral homes and 38 cemeteries. For their part, SCI agreed to comply with the FTC’s divestiture requirements, stating that “the proposed divestiture will remedy any alleged anti-competitive effects that could result from the acquisition [of Stewart Enterprises, Inc.].” For many competitors in the industry, concerns over anti-competitiveness are unlikely to end with compliance with the FTC’s divestiture plan. Tillman Funeral Home & Crematory, a family-owned business in West Palm Beach, Florida, for instance, estimates that SCI already owns eight of their 14 competitors in the area, even before the SCI-Stewart merger becomes final.

A Disturbing Track Record to Maximize Profits

Everyone deserves the benefit of the doubt, right? Not so fast. SCI has a track record that doesn’t exactly inspire confidence in a business that deals with families at their most vulnerable. In what was referred to as “Formaldegate” in the Texas media, the Houston-based company was accused of violating the Lone Star State’s embalming laws in the late 1990s, for a series of allegations including using unlicensed apprentices and over-embalming crypts to the point where families claimed that embalming fluid was oozing out of the bodies of their deceased loved ones.

Mistakes happen, right? Maybe it’s all a coincidence? Well in 2001, reports surfaced that Memorial Gardens, a SCI-owned Jewish cemetery near Fort Lauderdale, allegedly oversold plots, desecrated graves, exhumed remains and relocated buried bodies without the knowledge of family members (violating Jewish religious laws, not to mention basic human decency) in an attempt to create more burial space to maximize profits. They reached a $14 million settlement with the Florida Attorney General and a paid $100 million to affected families following a class action lawsuit.  Similar issues have been reported in Massachusetts as well as California, where an $80 million settlement was reached in a class action suit with more than 800 families. While not admitting any wrong-doing in any of these cases, SCI did commit to making changes and instituting better internal controls to ensure the proper marking and preservation of graves.

In multiple incidents reported by The Washington Post between 2007 and 2009, a facility owned by SCI in the Virginia suburbs of Washington, DC, faced allegations of bodies being stored on "makeshift gurneys in the garage" and "at least half a dozen veterans destined for the hallowed ground at Arlington National Cemetery [being] left in their coffins on a garage rack." 

Clearly this is an industry that’s ridden with problems. I know what you’re thinking: “why not just start my own company, provide good service and undercut their prices?” If only it were that easy. When it comes to funerals, most families aren’t inclined to try out a new business, even when the old ones provide lousy service and high prices. That’s why a behemoth like SCI mostly acquires long-time businesses with established reputations, rather than opening its own new ones. Remember, countless companies -- whose families specialize in this difficult business and have been doing it for decades -- are being systematically gobbled up by conglomerates like SCI. Even though SCI charges 42 percent more for a traditional funeral than their independent counterparts, it’s a hard nut to crack, especially in places like West Palm Beach Florida (a retiree haven) where some estimate they will control sixty percent of the death services industry after the merger with Stewart. Not to mention, it’s a vertically integrated business, so unless you own a funeral home and a cemetery, like SCI does, you’re at a distinct disadvantage.>

The Solution?

If only there was a law in place to reign in these types of abuses and protect consumers. Actually there is. It’s called “The Funeral Rule” -- which provides basic protections and standards on what information funeral homes must provide customers, like disclosing a price list for caskets, making lower-cost options available and permitting the purchase of products and services outside of packaged offers -- and it was signed into law by Ronald Reagan in 1984 and amended in 1994 under Bill Clinton. Unfortunately, though, it’s loaded with loopholes , from allowing mortuaries to charge a mandatory fee for funeral planning to its failure to regulate cemeteries without an on-site funeral home, and bereaved families are paying the price. We need to bury unscrupulous business practices in the death services industry by ensuring competition and consumer protections. And we can start by updating “The Funeral Rule.”