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DEATH
INC.
IN
SURPRISING NUMBERS, CHAINS ARE BUYING UP FUNERAL HOMES BUT
KEEPING THE NAMES, MAKING IT DIFFICULT TO TELL THE CHAINS
FROM THE INDEPENDENTS.
Published: Sunday, March 21, 1999
Section: LOCAL
Page: 1A
BY
ROBIN FIELDS AND MITCH LIPKA STAFF WRITERS
Aileen
Watters thought she was dying.
When
doctors told the 73-year-old Palm Beach Gardens woman in April
that leukemia could kill her within a month, she opened her
prayer book -- and her phonebook.
Not
wanting the financial burden of her funeral to fall to relatives,
Watters started calling local mortuaries from her sickbed.
Although she had decided she wanted "the cheapest way
to go," the prices only made her feel worse: as much
as $1,900 for a cremation, $500 for note cards. With a simple
memorial service, the bill came to more than $5,000.
"I
was floored," said Watters, who has confounded her doctors
by surviving well beyond their predictions. "I said,
`Whoa! Stop right there. I'm not interested.'
"I'd
rather give my money to charity than be overcharged."
Few
consumers know it, but in the past five to 10 years, South
Florida's funeral business quietly has shifted from an industry
of small, family-owned firms to one dominated by massive conglomerates.
The
result: fewer choices and higher prices for the one expense
no one can avoid forever.
The
world's two largest funeral home chains -- the Loewen Group
of Burnaby, British Columbia, and Houston-based Services Corp.
International -- now own or are affiliated with 58 percent
of the mortuaries in Broward County and 51 percent of those
in Palm Beach County. Smaller chains or independent local
businesses own the rest.
In
Boca Raton, Coral Springs and Lauderhill, virtually all the
homes are chain-owned; in Lake Worth and Pompano Beach, chain
homes outnumber independents by more than 2-to-1. Because
the homes they acquire usually keep their old names, the chains'
invasion has blindsided both consumers and regulators, a Florida
Senate report concluded in October. Alarmed by the findings,
the Legislature is considering a bill that would compel funeral
homes to disclose who owns them on ads, signs and contracts.
For
consumers, the identity of a funeral home's owner can be a
valuable piece of information.
A
Sun-Sentinel analysis of prices charged by area funeral homes
found that, on average, Loewen and SCI charge up to 62 percent
more than independent mortuaries for identical services.
The
analysis was done by collecting price lists from licensed
funeral homes throughout Broward and Palm Beach counties,
and comparing prices charged for services ranging from burial
to embalming to shipping a body out of state.
The
research found that the simplest cremation typically costs
$400 more at a Loewen home and about $600 more at an SCI home
than at an independent.
The
most basic burial averages $1,251 at an independent, vs. $2,026
at a Loewen mortuary and $1,800 at an SCI mortuary.
Chains
say price doesn't tell the whole story. They say their centralized
operations and buying power have transformed an antiquated
profession, shrouded in morbidity, into an efficient, modern
business they call "death care."
"They
say we are nothing but a carpetbagging, out-of-town company
that takes money from local businesses and sends it to Houston,"
said Jon Levinson, vice president for SCI's Broward County
properties. "Nothing could be further from the truth.
We can do all the things any funeral home can do, and more."
SCI,
which also owns numerous cemeteries, offers one-stop shopping
from initial consultation to burial to grief counseling for
survivors, Levinson said.
Loewen
officials would not agree to an interview, but in a written
statement, the company said it offers a 24-hour "change
your mind" policy, a quality-service guarantee and a
program for those unable to afford funerals.
Known
collectively in the industry as the "Big Three,"
SCI, Loewen and Stewart Enterprises Inc. of Metairie, La.,
now hold between 20 percent and 25 percent of the $25 billion
U.S. funeral industry.
But
unlike other superstores -- from Wal-Mart to Home Depot to
Babies 'R Us -- the funeral giants don't deliver discounts,
the Sun-Sentinel analysis shows.
And
even consumers savvy enough to shop around don't realize when
they've called the same company over and over because chain
homes aren't obligated to reveal who owns them.
"We
are deeply concerned with market power in this industry,"
said Jeff Kramer, the American Association of Retired Persons'
federal legislative representative. "I've seen it happen
in the utility industry, where dramatic consolidation has
left consumers with no choices. At least disclosure makes
consumers aware."
The name's the same
Ten
years ago, the big names in the South Florida funeral business
belonged to the families who tended the region's bereaved
and buried its dead.
Kraeer.
Hunter. Levitt-Weinstein. Babione.
Today,
the names remain on the signs, but the homes have changed
hands.
Loewen
has swallowed up all seven Kraeer homes, the five Levitt-Weinsteins
and Fred Hunter's seven-home Broward empire. SCI picked off
Babione's three Palm Beach County sites, as well as four Riverside
homes, four Menorahs and three Baird-Cases.
"There's
nobody left in my area for them to gobble up," said Bradford
Zahn, who took over the independent Tillman Funeral Home in
West Palm Beach after training under its founder.
SCI,
the world's largest funeral company, has more than 4,000 funeral
homes, crematoriums and cemeteries, up from about 3,100 in
1995. Nicknamed "McDeath" by rivals, SCI conducted
more than a half-million funerals last year, yielding about
$3 billion in revenue.
Loewen
owns or operates about 1,600 funeral homes and cemeteries
and generated $1.1 billion in 1998. Stewart has about 700
locations and hauled in $650 million in fiscal 1998.
The
chains' '90s buying spree went unnoticed by Florida regulators
until late 1996, when SCI attempted a hostile takeover of
Loewen -- a deal big enough to warrant automatic state and
federal review.
Officials
with the state Attorney General's Office antitrust division
were surprised to learn that SCI and Loewen owned so many
Florida homes that a merger would require them to divest properties
all over the state.
"They
had acquired one mom-and-pop after another and not triggered
the notification law, because each individual acquisition
wasn't expensive enough for the law to kick in," said
Trish Connors, chief of the attorney general's antitrust section.
The
merger fell through, but regulators took heed of the consolidation
trend.
Consumers,
however, remained unaware.
Even
now, for example, few know that in Broward and Palm Beach
counties, the largest Jewish homes are owned by the chains,
which are nondenominational. That makes some Jewish people
uncomfortable.
"My
perception [was that] a Jewish family has always been the
morticians because there are so many rules to follow,"
said Delray Beach senior activist Jay Slavin. "I'm so
amazed by this. I'm appalled."
SCI's
Levinson said his full-time staff includes rabbis and others
whose job is to assure adherence to religious tradition and
customs.
"I
guarantee the family-owned Jewish homes don't have that,"
he said.
Jewish
homes make especially attractive acquisitions, because Jewish
traditions favor burial, typically more expensive than cremation.
Jewish homes also produce the most upfront cash.
"Jewish
people believe in prearranging," Levinson said.
Hispanic
and African-American homes also are prized by chains. The
funeral industry remains almost entirely segregated -- blacks
choose black mortuaries; Hispanics choose Hispanic mortuaries.
And unlike non-Hispanic whites, who increasingly choose cremation,
minorities' customs favor burial.
Stewart
has snapped up Miami-Dade County's two largest Hispanic minichains,
Rivero and Caballero.
Most
African-American homes have stayed stubbornly independent,
however, convinced they can serve black families better, said
Sharon Seay, executive director of the primarily African-American
National Funeral Directors and Morticians Association.
Where
chains have taken over, they have reinvented how funeral homes
operate.
The
chains have established central prep rooms that handle the
unseen lab work -- cosmetology, embalming bodies, packing
them for travel -- for the entire region.
No
matter which Broward County SCI home a customer chooses, the
body goes to Tamarac for processing -- 4,000 to 5,000 bodies
a year. All SCI cremations in Palm Beach and Broward counties
go to the company's Fort Lauderdale crematory.
Critics
say these streamlining measures remove the personal care from
funerals.
"Why
is my mom going to the assembly line?" said Julian Almeida,
former general manager for SCI's Palm Beach County homes.
Almeida quit in 1996 to start Palms West Funeral Home in Royal
Palm Beach.
"If
I'm paying that kind of money to have my loved one transferred
in a van to Fort Lauderdale with maybe two or three [other]
bodies, what dignity is there in that? It's dehumanizing,
the whole thing."
But
SCI's Levinson said the added efficiencies don't shortchange
the people in his company's care: "We don't lose track
of the fact that we're dealing with a deceased person. I don't
think people would care [if they knew]. They just want to
know you picked Pop up, did whatever you needed to do, and
had him at the cemetery. ... Do we save money? Sure."
The bottom line
But
the chains apparently do not pass those savings on to consumers.
The
least expensive casket available in Broward and Palm Beach
counties ranges from $295 at two local independents to $2,095
at SCI's Babione home in Boca Raton -- a 610 percent difference.
In
more than one out of five deaths in Broward and Palm Beach
counties, remains are transferred out of Florida. For the
exact same service -- embalming a body or packing it in ice,
plus a ride to the airport -- consumers pay as little as $395
or as much as $2,540; on average, independents charge $1,265,
compared to $1,813 at chain homes.
Chains
"are just mauling the industry and consumers," said
the Rev. Henry Wasielewski, a Phoenix, Ariz., priest and consumer
activist who runs a Web site that helps people find lower-cost
funeral options.
Many
in the funeral industry say it is unfair to compare funeral
home prices, because they provide such varied levels of service.
The
most upscale homes offer battalions of staff and stock every
conceivable product. Their public rooms mimic the muted grandeur
of mansions, complete with fabric wallpaper and chandeliers,
fresh flowers and deep-pile carpet. Other, more humble homes
occupy the ground floors of their proprietors' homes and have
smaller crews and scant inventory.
"Some
people want a Cadillac; others want an Oldsmobile," said
John McQueen, owner of Anderson-McQueen Funeral Homes in St.
Petersburg and president-elect of the Florida Funeral Directors
Association.
Loewen
would not address specific questions about pricing beyond
its written statement.
"The
Loewen Group is dedicated to providing extraordinary service
and compassionate care at a fair price," the statement
says.
Levinson
said SCI sets prices home by home, based on the surrounding
market.
"Each
location looks at their costs, the community needs, and prices
competitively to earn a profit, which is not a dirty word,"
Levinson said. "That's what independents do, too."
But
chains have to recoup money spent on acquisitions and, as
publicly held companies, the funeral giants face profit pressures
that independents do not, critics say.
"When
the stockholder becomes part of the equation instead of the
family, there's something wrong," said Marci Piasecki,
director of Lynn University's funeral services program.
Chains
save a bundle by getting volume discounts on merchandise and
by centralizing aspects of their services, but they lose certain
economies that keep overhead low at mom-and-pop shops.
"The
corporation may frown on Dad working 60 hours a week,"
said Kelly Smith, spokesman for the National Funeral Directors
Association. "It's certainly going to frown on Mom doing
the books. Its insurer is going to object to the kid mowing
the lawn."
Chains
have little incentive to keep prices down. Consumers seldom
choose a funeral home based on cost. A recent National Funeral
Directors Association survey showed price is only the fourth
most important factor for those seeking funeral homes -- behind
location, reputation and previous experience with the family.
Loewen
and SCI each has at least one local home aimed at the low
end of the market.
SCI's
E. Earl Smith Memory Gardens Funeral Home in Lake Worth charges
$1,755 to prepare a body for shipping out of town. Its cross-town
sister, All Choice at E. Earl Smith, is also owned by SCI
but charges $775 for the same service. What customers don't
know is that All Choice does the out-of-town shipping for
Memory Gardens -- the only difference is the price.
The
chains also have developed sophisticated marketing techniques
to encourage customers to buy more -- and more expensive --
products. Cold calling and targeted mailings have become industry
norms. Consumers even have complained about graveside sales
pitches.
When
Stewart Enterprises entered the St. Petersburg market, the
conglomerate unleashed more than 50 salespeople just to sell
prepaid plans, McQueen said. "That made us take a much
more aggressive approach," he said. "When my father
was still alive, we would never mention [customers] could
prepay. Today, we do direct mail, TV ads, telemarketing."
The
independents' decision to fight fire with fire has made aggressive
solicitation even more common. Kramer said the AARP gets growing
numbers of calls from seniors besieged by funeral-industry
come-ons.
In
a complaint filed with the Florida Division of Consumer Services
in 1998, Charlotte Rotondo of Englewood reported receiving
up to 10 solicitation calls a week from a Loewen-owned home,
trying to sell her cemetery plots.
"Make
sure they never bother us again!" she begged regulators.
No change on horizon
Florida
consumers can expect little regulatory help, however, in coping
with an increasingly bottom-line-oriented funeral industry.
The
Federal Trade Commission's Funeral Rule, which requires homes
to give written price lists to anyone who requests them, aids
only the most educated consumers.
"If
you don't know or are too grief-stricken to ask, it won't
be particularly helpful to you," FTC attorney Mercedes
Kelley said. "People aren't going to deal with these
issues until they smack them in the face."
The
rule also places no limit on the mandatory service fee --
an administrative charge that covers such things as paperwork,
consultation, coordination with cemeteries and other parties
and business overhead -- charged by mortuaries.
Broward
and Palm Beach county homes charge service fees ranging from
$250 to $2,370. Chains average $1,564, or 55 percent more
than the independents' average of $1,009.
"It's
a fee with no relationship to the goods and services you select,"
said Lisa Carlson, executive director of the Funeral and Memorial
Societies of America, a consumer group with branches nationwide
that helps its members save money on funerals. "Consumers
have no choice but to pay it and no control over that part
of their expenses."
In
Florida, two agencies oversee the funeral industry.
The
state Comptroller's Office polices funeral arrangements made
in advance of death, and the Department of Business and Professional
Regulation monitors funeral directors' licenses and makes
sure they meet educational requirements.
In
January, after finding what it said were record-keeping discrepancies,
contracts amended without clients' approval and improper trust-fund
withdrawals, the Comptroller suspended 16 Loewen homes' licenses
to sell contracts for prepaid funerals. The company is in
negotiations with the state to settle the case out of court
and allow the homesto resume selling contracts.
But
neither state law nor state officials can protect consumers
who don't read or understand the contracts' fine print.
If
consumers cancel contracts after 30 days, for example, they
are entitled to their money back for services but not merchandise.
One
woman complained to the comptroller that when she tried to
cancel, the home said she could either take immediate delivery
of her casket or lose the upfront cash she had paid for it.
Too
bad, the agency had to tell her.
"She
was just so mad," said Sharon Dawes, who supervises financial
examiners in the agency's Fort Lauderdale office. "She
took delivery and used [the casket] as a coffee table."
Though
the Department of Business and Professional Regulation, too,
takes consumer complaints, the agency seldom steps into individual
disputes over money or mistreatment. Its main role is to monitor
the industry's professional and educational standards, said
John Currie, the board's executive director.
So
consumers are pretty much on their own -- and ill-prepared
emotionally to help themselves.
Often,
they feel guilty measuring their love for a lost family member
in dollars and too wrung out to contest bills.
"There's
a blinding grief," said Lawrence Serlin, 84, of Palm
Beach Gardens. "It's such an emotional burden -- after
it's over, you don't think, `I'm going to get that guy for
cheating me.'"
The
October Senate report offered several suggestions for improving
funeral home oversight: mandatory ownership disclosure, data
collection to monitor consolidation, higher standards for
pre-need contract salespeople, and a tighter law governing
trust fund and refund policies.
But
the current bill goes no further than disclosure and, with
no House companion bill emerging, the prospects look shaky
for its passage. State funeral directors have split into two
factions:
Florida
Funeral Directors Association members argue that the bill
will do little to protect consumers and much to dim their
own prospects. If chains can't keep local homes' names --
and the good will that goes with them -- their Florida splurge
could end.
"My
name is what brings corporations to my table," said McQueen,
the FFDA's president-elect, of what might tempt chains to
bid for his family's three St. Petersburg homes. "Besides,
if the chains are forced to plaster their names on everything,
they'll start national ad campaigns and become brands like
Home Depot or Wal-Mart. It's easier for me to compete against
them one on one."
But
a breakaway group of independents, represented by the Independent
Funeral Directors Association of Florida, disagrees. They
say the bill gives vital information to consumers and will
keep smaller homes from being steamrolled by chains.
"It
seems cruel that consumers could have no idea they were price-shopping
at the same company over and over again," said Robert
Cerra, an IFDA lobbyist. "The ability of these companies
to hide behind multiple names has kept them from accountability."
Although
Massachusetts, Maryland and several other states have passed
similar measures, Florida funeral directors who work for chains
seem to view SB 196 as a potshot at their professional integrity.
"I
sold my business. I sold my name," said Largo Mayor Thomas
Feaster, practically in tears at a January Senate committee
hearing. Feaster has worked for SCI since the chain bought
Moss-Feaster Funeral Homes from his family in 1984. "But
I never sold my soul."
Stocks have plunged
It
may not take an act of the Legislature to halt chains' advance
in Florida.
After
years of being Wall Street favorites, SCI and Loewen have
experienced a series of financial setbacks.
Their
position looked ideal: Investors latched onto their projections
for a "death boom" as Baby Boomers begin to die
off. After a century of decline, the national death rate is
expected to rise from 8.7 per 1,000 now to 13.6 per 1,000
in 2050.
But
in recent weeks, analysts at Merrill Lynch and Credit Suisse
First Boston released reports saying SCI and Loewen had overpaid
to expand. SCI's stock price plummeted from $47 to about $15,
and Loewen's fell from nearly $29 to about $1.75, prompting
top executives at both companies to resign.
The
companies also face class-action lawsuits accusing them of
misleading stockholders with overly rosy financial pictures.
Loewen
on March 1 announced it was raising $193 million in cash by
selling 124 cemeteries to an investment group that includes
two former executives.
SCI
bought more than 370 properties last year, spending $784 million.
The company told stockholders in February that acquisitions
remain a key part of its strategy, but that its first priority
was a marketing push to boost prepaid funeral sales.
Though
most consumers remain unaware of chains' immense South Florida
holdings, the local market may be responding to the higher
prices they have brought. In 1997, for the first time, more
Floridians opted for cremation than burial. SCI's Levinson
attributed the switch to changing mores, not cost.
"It's
not always price," he said.
Aileen
Watters dusagres,
She and her husband joined the Palm Beach Funeral Society,
through which they arranged to be cremated - for less than
$900 each.
PUBLISHED
MONDAY, MARCH 22, 1999
Because of a reporter's error, the name of a funeral home
chain appeared incorrectly several times in a package of stories
beginning on Page 1A in Sunday's editions. The correct name
of the company is Service Corp. International.
We regret the error.
PUBLISHED TUESDAY, MARCH 23, 1999
The ownership of Beth Israel Memorial Chapel in Delray Beach
was incorrectly stated in a chart on Page 12A of Sunday's
editions. Beth Israel is independently owned and not affiliated
with any chain.
We regret the error.
PUBLISHED THURSDAY, APRIL 1, 1999
A story on Page 1A of the March 21 edition inaccurately characterized
the ownership of the Fred Hunter group of funeral homes in
Broward County. The group is owned by Prime Succession, a
firm in which the Loewen Group has one-fifth ownership.
We regret the error.
Copyright
1999, SUN-SENTINEL Unauthorized reproduction prohibited.
The SUN-SENTINEL archives are stored on a SAVE (tm) newspaper
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