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The Deathcare Business

The Goliaths of the funeral industry are making lots of money off your grief

BY MIRIAM HORN.
Cover story from US News & World Report, 3/23/98

Father Henry Wasielewski doesn't look like a man who would get threatening phone calls in the middle of the night. An absent-minded, gray-haired little elf, padding about his small apartment in sweatpants and stocking feet--it is hard to imagine him being chased by sheriffs, exiled by his bishop, or warned by gloomy morticians that the next corpse they disposed of would be his. But unlikely as it may seem, this 68-year-old Catholic priest from Tempe, Ariz., has become serious trouble for the nation's morticians and coffin sellers and the new corporate kingpins of the death-care trade— the "lying thieves," as he calls them, "who prey upon the poor and bereaved."

Wasielewski is a connoisseur of the techniques many funeral directors use to take advantage of vulnerable people, from exorbitant markups to deceptive sales practices. But nothing before has distressed the priest as much as the latest twist in the charnel trade. Last September, the Catholic archdiocese of Los Angeles--the nation's largest, home to nearly 4 million Catholics--signed a deal with Stewart Enterprises, a Louisiana-based corporation. The church, worried about losing its market share of burials, agreed to allow Stewart to build mortuaries in its six biggest cemeteries--a valuable endorsement for a death-care provider. In return, the church will get an undisclosed percentage of the proceeds from each funeral Stewart performs at the cemeteries, money that will help Cardinal Roger Mahony realize his dream of building a $100 million cathedral downtown. "Sinful," Wasielewski calls the deal. "Most Stewart homes charge thousands more than many other mortuaries for the same funeral." A director of the archdiocese's cemeteries responds that Stewart has agreed "to honor the cardinal's request to keep prices reasonable."

The L.A. agreement augurs a new economic reality for churchgoing Americans, as Stewart's competitors scramble to make similar arrangements with other dioceses and faiths. But its implications are broader still, reflecting a radical change in the way all of America takes care of its dead. Chains are coming to dominate the country's $25 billion funeral business. While there are a number of smaller chains, Service Corp. International (SCI), the Loewen Group, and Stewart ("the Big Three") own 15 percent of the country's 23,000 funeral homes, handle 1 in every 5 funerals, and have established a set of practices others feel pressured to emulate. The casket business is dominated by two companies, York and Batesville, which together handle two thirds of casket and urn sales; Batesville's parent company, Hillenbrand Inc., also owns Forethought, the largest "pre-need" insurance company. Even the Neptune Society, which scatters ashes at sea, is now owned by SCI.

Markups in the funeral industry have always been high. But in the past five years, funeral prices have risen three times faster than the cost of living. Knowing that mourners don't shop around at their hour of need (a lack of price sensitivity the Loewen Group described in a report to the SEC as one of the "attractive industry fundamentals"), chains often raise prices soon after acquiring an established independent home, sometimes upping fees more than 100 percent. Caskets, which typically make up half a funeral's cost, can be marked up more than five times. Stewart's South Park Cemetery in Pearland, Texas, for instance, charges $3,495 for Batesville's Kensington Green casket, which wholesales for $675. At many mortuaries, two hours of hearse time, which cost about $25 to provide, are billed to the bereaved at $200 or more; flowers, grave vaults, monuments, thank-you cards--all are marked up 300 to 800 percent. With a cemetery plot and marker, the typical American funeral now costs $8,000 or more.

Mortuaries have refined the art of merchandising, a necessity at a time when more than 21 percent of Americans opt for cremation, up from about 4 percent in 1963. At a seminar sponsored by an industry newsletter, one speaker advised funeral directors "how to add $1,400 to each cremation call" by requiring an "identification viewing" of the loved one. "If the family has not opted for an expensive container, make sure you show them Mom's body in the cardboard box. Someone in the family is bound to say, 'Maybe we should get something nicer.' " Consolidators also profit by owning a number of funeral businesses in one place. Cemeteries and mortuaries owned by a chain feed one another bodies, and most economies achieved by "clustering"--sharing hearses, embalming facilities, and staff--are passed on to stockholders, not consumers.

The rewards of such strategies are great. Both Stewart and SCI, which is the largest funeral company in the world, had 1997 profit margins on operations of about 25 percent. Since going public in 1991, Stewart's stock price had, by last October, risen 426 percent. Stock analysts predict a still rosier future, as America enters the golden era of the death-care industry. After a century of declining mortality, an aging America will reverse that trend, pushing the present death rate of 8.7 per 1,000 to 13.6 per 1,000 in 2050. The Big Three already are snaring those futures: In 1997, SCI had $3.2 billion in prearranged funerals on the books. Young job hunters are taking note: Top funeral directors can make $100,000 or more a year. Mortuary-school enrollments are up 45 percent since 1990. The National Academy of Mortuary Sciences advertises on the Web www.drkloss.com; the curious can click on an opening casket lid.

Friend to consumers. Wasielewski's ongoing battle with these death-care Goliaths might be utterly quixotic were it not for a relentlessness that can weary even his supporters. Using only an old computer, a few volunteers, and a copy machine at Kinko's, he surveys cities to find both price gougers and fair-priced funeral homes, then makes that information available to consumers by phone or on the Web: Someone in Houston, for instance, can call and learn which funeral home charges $1,495 for essentially the same service and casket that cost $9,910 at a chain-owned home. With his circle of "spies" in the business, the priest has documented such common mortuary practices as selling pricey caskets sealed to protect the loved one's body from the elements, containers that many mausoleum managers say in fact can liquefy the flesh and even explode--sometimes blowing the front right off the crypt. Every corner of his small apartment is stuffed with "evidence": spilling from battered, metal file cabinets, heaped on hard plastic chairs and his single bed. He shows a visitor a sheet of paper in an 80-cent plastic frame. When a widow mentioned that she'd prefer gifts to charity over flowers, the funeral home took the initiative to print the notice, "then charged the lady $75 for paper and frame. She's not supposed to be paying attention, you see. She's supposed to be too grieved."

The priest's efforts reflect the belated maturing of a consumer movement first given life 35 years ago by the late Jessica Mitford's hilarious expos? of the funeral industry, The American Way of Death. The dogged old priest, whom Mitford in later life admired as "an avenging angel," has been the movement's most persistent crusader, but he is just one of many activists who devote themselves to educating consumers and developing affordable options for care of the dead. A national network of memorial societies now serve as buyers' cooperatives for a half-million members, finding low-priced mortuaries and sometimes negotiating rates for their members; their association, FAMSA (Funeral and Memorial Societies of America), lobbies Washington on consumers' behalf. A network of alternative suppliers has emerged, offering caskets and urns via catalog shopping and the Web. There is even a growing home-funeral movement that helps people bypass funeral directors entirely, teaching them to handle body preparation, paperwork, transport, and arrangements with a cemetery or a crematory themselves box, Page 55).

Wasielewski's own crusade on behalf of funeral buyers began 20 years ago, when someone called to say that an old woman in his parish was on the street begging money to bury her husband. When he called on the widow, ill and alone in her small abode, she said the funeral would cost $995, for her an unimaginable sum. Wasielewski then called the mortician, who explained that the woman had chosen a fancy casket. At the rosary that night, the priest decided to see for himself. "I thumped the casket, and called others up to do the same, and we realized it was the cheapest plywood box you could find." The next morning, he called the mortician and threatened to go to the state attorney general. "He instantly said he'd cut the price in half. I thought, 'If you can cut it just like that, you were ripping her off and knew you were.' "

The priest's concern turned to obsession a few years later when Jack Botimer, a local mortician dismayed at his peers' efforts to squeeze thousands of dollars extra from clients, slipped Wasielewski a list of wholesale casket prices. In the close fraternity of funeral directors, it was a rare betrayal. Botimer also confirmed a practice the priest had seen firsthand: morticians bribing clergy in exchange for a recommendation from the pulpit. Wasielewski, whose personal resources are so modest he frequently makes a meal of the free appetizers at local bars, had himself been offered gifts by a high-priced mortuary. With an Arizona Republic reporter, he found morticians boasting of the cases of Scotch and trips to Las Vegas they'd given priests who let them hand out advertising calendars in church. Remembering the mortuary calendar that hung on his own family's wall--and his later realization that they had used that funeral home for every burial and "every time they ripped us off"--Wasielewski would in his poor parishes from that day on cut the ads off the calendars, one by one.

Swing your partner. People who spend their lives around funeral homes--like Edward Chavez, a Phoenix casket distributor who sells his wares for a fraction of what most mortuaries charge--have observed funeral directors cultivating other useful friends. "They'll bring an ICU nurse a big old color TV at Christmas," says Chavez, "and in return, she'll call when a patient is about to die. They show up 10 minutes later and say, 'We've been called to pick up your husband,' and the family doesn't know any better, so they go along."

Wasielewski's criticisms of the clergy have brought him reprimands from his Catholic superiors, and not for the first time. As a young man, he once was expelled from seminary for recording commercial albums of square-dance calls. (Before becoming a priest, he worked as a square-dance caller and hosted a children's TV show.) His record deal was discovered by the seminary, despite a trick he contrived to look at his album covers secretly. "The record company would hide the stuff at night under a big rock at the edge of the seminary. In the morning, we'd do walking prayer; I'd just kind of pray on down toward the rock, slip the stuff under my cassock, and take a look."

When, in 1982, Wasielewski co-founded the Interfaith Funeral Information Committee and began publicizing mortuary prices, he again was called in by his superiors: "We've got a mortician complaining you lost him $70,000 last year." "Well," replied Wasielewski. "He overcharges more than $1,000 a funeral, and did 250 funerals, which means he's ripped our people off for a quarter-million dollars. If I only cost him $70,000, we've got $180,000 to go."

By 1985, his bishop had had enough. For the next six years, he effectively suspended the troublemaking priest, neither assigning him a parish nor allowing him to live in a rectory. Only in 1992, two years before retirement, did Wasielewski get a small rural parish near Phoenix called Queen Creek. He hadn't been there long when he wrote a letter to a local mortuary banning their "body deliverymen" (he refuses to call them funeral directors) from entering the church, "disrupting the congregation with their attempts to imitate Catholic genuflections, and passing out mortuary advertising and prepay-plan leaflets." Again, the mortician complained to the bishop, who ordered Wasielewski to write a letter of apology. He did write a letter--urging the mortuary to refund money to families he believed the mortuary had overcharged.

In the past decade, Wasielewski has focused on the chains that increasingly dominate the industry, and most recently on Stewart's "unholy" alliance with the church in L.A., one region where consolidators' impact has been greatest: The Big Three own 40 percent of all funeral homes and have in some cases bought cemeteries to which they direct bodies from those homes; Loewen, for instance, recently outbid SCI and purchased a stake in Rose Hills Memorial Park, the largest cemetery in North America. The corporations have expanded their dominion virtually unnoticed, since when they buy a home they typically keep the old name and even hire the previous owner, making it appear that the home is still locally owned. (William Heiligbrodt, president and chief operating officer of SCI, said the company does not put the SCI name on homes it acquires "because we never have. It's in our best interest to do it that way.")

Megamarketing by the conglomerates--heavy on pre-need and packaged deals--has forced independents to change their own sales practices in self-defense. In L.A., for example, the archdiocese found its cemetery plots harder to sell. "We'd had successful penetration into the Catholic market until the chains came in, then our annual interments dropped from 10,000 to 8,000," says James Tixier, a director of the archdiocese cemeteries. "Cemeteries are a big revenue generator for the diocese. We call ourselves a ministry, but we must straddle spiritual and temporal needs." Cardinal Mahony, Tixier says, decided to deal with Stewart only after getting a cold call at home from someone selling funeral services and a gravesite. "The cardinal figured we better get in the game and provide the same one-stop shopping offered by the competition."

Stewart's goal is to perform funerals for at least half those buried in archdiocese cemeteries. The church will advertise and provide the company's salesmen with parish lists, Tixier predicts, and stands to gain significantly. Not only will the church receive new income from its share of mortuary proceeds, but Stewart will steer Catholic bodies from its other mortuaries to the church's cemeteries. "To handle the volume, we're building mausolea," says Tixier, "which can stack 16 caskets in the space of one grave."

McDeath. A similar defensive strategy is visible in Colma, a town near San Francisco that is the nation's largest necropolis, with 17 cemeteries and nearly 2 million graves. When SCI bought Woodlawn Cemetery and began bidding on others, the nearby independent cemeteries decided they had better turn up the heat. Cypress Lawn, for instance, a cemetery where people pay up to $18,000 for a crypt near the Hearsts and de Youngs, jettisoned its upper-crust exclusivity. "The arrival of McDeath," says manager Kenneth Varner, "forced us to create a marketing team to do cold calling and direct-mail sales."

Funeral directors have introduced other innovations in the selling of the American funeral. Consumers often complain that mortuary salesmen ambush them while they are visiting Mother's grave or "borrow" funeral registry books and solicit those who came to pay their respects. SCI counselors are advised to remember "the four S's: Serve the family, sell the family, solicit referrals, sell referrals." Wasielewski describes the industry's widespread use of the "third-unit, target-merchandising system," which capitalizes on the propensity of the bereaved to avoid the two cheapest caskets in the showroom: Homes generally display only midrange to expensive caskets, assuring a higher-end choice. Edward Chavez describes another technique: "For the Mexicans, they glue a $3 picture of the Blessed Mother inside the lid and charge hundreds more." People don't question such charges, says Wasielewski, because they are intimidated by the pseudo-religious atmosphere funeral homes contrive. "You don't sign the papers for a new car with Jesus staring down at you over the salesman's shoulder."

Industry defenders respond that business is business. People associated with death have always been unfairly shunned, they say, and deserve whatever compensation they can get for their gruesome work. Besides, customers should pay more for fancier locations and facilities. Heiligbrodt, for instance, SCI's COO, explains that the company's homes are consistently among the priciest in any market because, "It's like the difference between a Cadillac and a Ford." Asked to be more specific about what extra value a customer gets at an SCI home, he illustrates with a story about a company he once worked with that made screwdrivers: The same item, of first-rate steel, was 29 cents with a green handle, he says, but with a yellow handle, they sold it for $2.29. "The guy that bought the high-priced one associated the yellow handle with quality, and was satisfied." Funeral retailing, he says, is the same. "If I tried to sell a $1,400 funeral at one of our good properties, like Campbell funeral home on Madison Avenue in New York, nobody would come. Spending $10,000 makes some people feel better."

Here's the bill. Such arguments failed to convince Jessica Mitford, who took a parting shot at SCI's CEO, Robert Waltrip, on the eve of her death in 1996. Having been repeatedly turned down by him for an interview, she made a last request that, given the fame she'd brought his company, he pay her $562.31 bill for the direct cremation she'd arranged through her buyers' cooperative. It was a huge savings, she noted, over what it would have cost had SCI handled her remains.

With her preference for bargain-priced cremation, Mitford was not, she well knew, the kind of customer the consolidators most desire. In fact, the death industry is increasingly targeting Catholics, Hispanics, African-Americans, and Asians precisely because these groups still hold to traditional rituals and have not participated in the great shift among white Protestants: toward cremation and bodiless memorials, away from store-bought funeral services with an expensively embalmed body on view in an expensive casket. Twenty-one percent of whites now opt for what the industry scorns as "bake and shake," a figure predicted to double by 2010. Cremation rates among all races are higher still in regions where the population is mobile, says theologian Tom Long, author of a forthcoming history of the Christian funeral: 50 percent in Nevada, "where almost no one has a home church or cemetery," versus 3 percent in Alabama, "the rare part of America where people still have a sense that they're from somewhere." In San Francisco, says Varner, 80 percent of Anglos now opt for cremation.

The funeral industry has made some effort to recover the Anglo market. Pat Hatfield, a white-haired woman who runs the Colma Historical Society, talks eagerly about how modern and cheerful the town's 17 cemeteries have become, showing pictures of their "state of the art ovens" and monuments like the one marking Woodlawn's children's section, of Snow White and the seven dwarfs. They used to have angels, says Hatfield, an acrid whiff of crematory smoke wafting into her office on a passing breeze, but "angels are kind of down." To encourage a "lighter frame of mind," she says, several cemeteries now offer free get-acquainted buffet lunches on the grounds. Elsewhere, the business has taken a similar Disney-like turn: A funeral home in Florida organizes cruises to the Bahamas to help mourners bounce back; another offers drive-by viewing of the deceased behind glass. Still, the crowds that once thronged Colma on Memorial Day and Mother's Day have disappeared. Though Hispanic and Filipino visitors regularly come to place flowers and to picnic on the graves, Anglo visitors, say residents, are invariably tourists--or are headed to visit Fido at the pet cemetery on top of the hill.

A political battle now underway in Colma underscores just how important the ethnic market has become. This town of nearly 2 million dead souls and 1,100 live ones has for two years been arguing over a plan to build a $20 million casino near the Serbian cemetery. The developer charmed local voters with barbecues and birthday cakes and free bus trips to the wine country, and most approvals have been won. But opponents are still hoping to defeat the project with testimony by a master of feng shui--a Chinese technique for assessing the good or bad fortune yielded by arrangements of physical space. His warning of grim prospects, both for the card players and the buried ancestors, has alarmed cemetery owners. They covet Chinese customers, who compose a large part of the Bay Area market and since the 1949 revolution have made a practice of bringing ancestors' bones from the homeland to join them in the New World. Selling one grave, in this case, means selling to past as well as to future generations.

The other highly desirable market for death-care providers is among African-Americans, who often favor grand funerals. The big companies are also attracted by high mortality rates among young blacks. York, for instance, now sells a casket that can be drawn on with magic marker. A salesman at the annual National Funeral Directors Association meeting told a reporter that York expects it to be "a big seller in the inner cities, for the teenage market."

The appeal of ethnic markets suggests that chain-church alliances are the wave of the future. In 1995, the National Baptist Convention--the association of black churches--agreed to endorse Loewen of British Columbia as its preferred death-care provider and to appoint two members of each congregation for training as funeral counselors. Introduced from the pulpit as the people to see for mortuary services, graves, and tombstones, the counselors received a 10 percent sales commission from Loewen, with the pastor getting an added 6 percent, the convention 5 percent. African-American undertakers--proprietors of one of the oldest black-owned businesses in America and traditional pillars of their communities--protested that the convention had sold them out, to no avail. (The deal was terminated when convention leader Henry Lyons came under investigation for fraud and extortion, charges on which he was arrested in Florida last month.) Still, the Funeral Service Insider Newsletter predicts many more such partnerships: "Given the power that chain-church relations have to pull market share, independent Christian homes, with their long history of helping the poor, will be unable to compete . . . and will sell out to chains, who do not do charity funerals." For L.A.'s Catholic poor, Tixier says, the plot will be free; the Stewart funeral will not. Stewart Vice President Hughes Drumm says the company will consider charity cases on an individual basis.

Bad blood. As the stakes grow higher, the fights among funeral homes, discounters, and consumer activists grow meaner. In 1997, SCI filed a defamation suit against Darryl Roberts, former funeral-home company president and author of Profits of Death: An Insider Exposes the Death Care Industry. SCI claimed Roberts falsely quoted CEO Waltrip saying his goal was to make the company "the True Value Hardware of the funeral-service industry." In 1988, soon after Jack Botimer began helping Wasielewski dig up dirty trade secrets, Botimer's mortuary burned down as a result of what investigators believe was arson. His funeral home was also hit with $47,000 in fines by the Arizona State Funeral Board, a board dominated, as in most states, by funeral directors. When Edward Chavez resisted pressure from morticians to quit selling caskets to Botimer, he wound up with sugar in his gas tank and late-night calls advising him he'd "better get one of his caskets ready" for himself. He often has received angry calls from customers demanding their money back: They arrived at the funeral home, they tell him, only to be shown a casket busted at its hinges and propped open by a two-by-four; Chavez had delivered damaged goods, the funeral director told them. Consumer Casket USA, a low-price national distributor, had problems with "funeral director vandalism" so often, says President James St. George, that the company now takes videos as the casket leaves the shop and requires truckers to sign for its condition on delivery. The Federal Trade Commission (FTC) receives regular complaints of boycotts: casket factories refusing to sell to discounters or to mortuaries that won't sell out to the chains.

Despite lobbying efforts by consumer activists for more stringent government oversight, the FTC has been a weak conscience for the funeral business. Though in 1984 it issued a Funeral Rule, requiring homes to provide an itemized price list to customers without delay, only in recent years, an FTC spokeswoman says, has the commission sent out undercover buyers to find violators, who are usually penalized with no more than a few hours of "offender's education." The rule also works against consumers by permitting homes to charge a "nondeclinable fee" in addition to markups on specific merchandise and services. That means homes that do just a couple of funerals a month--as many do--stay in business by loading all overhead onto a few consumers.

The courts have been somewhat more active. In 1995, independent funeral-home owner Jeremiah O'Keefe sued Loewen for engaging in predatory trade practices. He accepted a $175 million settlement after a rural Mississippi jury awarded $500 million, having heard testimony by former Loewen employees confirming that they were ordered by the company to sharply raise prices at newly acquired homes or face dismissal. The settlement left Loewen open to a hostile takeover bid by SCI, but the company survived and the following year acquired $1 billion worth of new homes.

Wasielewski's latest obsession is the protective-sealer casket. For years, Wasielewski had heard from mausoleum managers that these expensive coffins--sold by the millions with promises that the elements will be kept at bay--in fact often lead to the body's putrefaction. In the sealed environment, anaerobic bacteria devour soft tissues, producing gas that sometimes bursts the casket with a great spewing of goo. Danell Pepson of Uniontown, Pa., says she discovered the problem when her grandmother's remains began seeping out of a fancy copper casket, leaving a brown, foul-smelling tar in front of the mausoleum; not knowing what it was, Pepson had repeatedly scrubbed away the ooze. When her grandmother was finally disentombed, Pepson says the funeral director offered her a "disaster kit"--a kind of rubber suit to hold liquefied remains within the casket. Pepson eventually won $40,000 settlements both from the undertaker and from the York casket company, though it denied wrongdoing.

Now Wasielewski is busy thinking up new ways to draw attention to the oozing caskets. His latest brainstorm: laying out a dead pig in a sealer casket, along with a video camera to record the process of liquefaction. Meanwhile, his protests against the deal between Stewart and the archdiocese have not quieted. The priest still hopes that Catholic funerals might one day again conform to what he believes are church teachings: "A funeral is a sacred ritual that belongs in church. It should be as simple as the white pall that covers a Catholic casket, signifying every man's equality and humility in death." His battle in Los Angeles may be lost, but the avenger has not given up.

 
 
 
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