Economy

Nation's largest funeral company keeps growing amid complaints, protests

FTC considers SCI's acquisition of second-largest funeral home chain while concerns rise over its increasing dominance

SCI, the nation's largest funeral home chain, is set to acquire a competitor, increasing its dominance over the industry.
Chris Hondros/Getty Images

Penny Dash had never planned a funeral before. But when her father-in-law was dying, she took on the task for her grief-stricken family. She called a funeral home near where she lives in Maryland and asked how much they should expect to pay. They told her around $10,000.

That figure seemed high.

It is: Even by the National Funeral Directors Association’s generous estimate, the national average is $7,045.

She worried how her mother-in-law, on a fixed income and with diminishing savings, would manage. So she got in touch with the Jewish Funeral Practices Committee of Greater Washington. When the time came, they helped her organize a plain, Jewish funeral for under $2,000.

The Washington Jewish community, though, fears the next generation may not be as lucky.

The Jewish group was able to provide a low-cost funeral because of an agreement with a local funeral home guaranteeing the ability to provide simple, affordable Jewish funerals at low costs. But if a planned merger goes through, that funeral home may come under the ownership of Services Corporation International, the United States’ largest death-care company. Many fear this will mean higher prices.

SCI, also known by its consumer-facing brand name Dignity Memorial, is the funeral industry’s behemoth with more than 1,800 funeral homes and 380 cemeteries. By the end of this year, the Federal Trade Commission (FTC) is expected to approve SCI’s acquisition of Stewart Enterprises, the second-largest funeral home chain in the country. The merger will grow SCI to 2,168 locations and roughly 15 percent of the U.S. market, according to a recent report in Bloomberg Businessweek.

The Jewish community in Washington, D.C., is among those who are concerned about the merger.

“Our community’s funeral home is being taken over by this giant conglomerate,” said Louise Chatlynn, who works with her synagogue’s burial society in Maryland. “It’s jacking up the price and coming between the community and the bereaved.”

Chatlynn and Dash were among a small group of protesters outside the FTC’s Washington headquarters on Tuesday. On the sidewalk outside the hulking gray building sat a simple pine casket with a printed sign attached to the front reading, “I CAN’T AFFORD TO DIE.”

For its part, SCI said it plans to honor the lower-cost contract if the merger goes through, and when it expires it will be happy to bid on a new contract.

But for some, SCI’s growth raises concerns about competition. Other national chains are different, said Joshua Slocum, the director of the Funeral Consumers Alliance, a national consumer advocacy group, who worries that a large, publicly traded corporation is not fit to care for customers who are in particularly sensitive and emotional situations in the wake of the death of a loved one.

“You can’t have government regulators doing what they do with other kinds of competition,” he said. “If I don’t like the price at The Gap, I’ll walk out and go to TJ Maxx. The Gap doesn’t have an emotional hold on me.”

Growing quickly

The Stewart deal is part of a pattern for SCI, which has come a long way since its beginning as a family-owned company in Houston in the early 1960s. Much of SCI’s growth has happened over the past decade. In 2006, the company acquired its largest competitor, Alderwoods Group, adding some 600 funeral homes to its holdings. In 2010 it took over Keystone North America, another funeral chain, and in 2011 it bought a majority stake in The Neptune Society, Inc., the largest direct cremation organization. SCI is listed on the New York Stock Exchange and trades for around $18 a share. Last year it had a net income of over $154 million.

According to Bloomberg Businessweek, SCI’s size saves the company operating money by allowing it to share cremation facilities, hearses and staff, while also guaranteeing discounted prices on embalming fluid, caskets and flowers.

But while SCI may enjoy economies of scale like Walmart, it does not seem to pass the savings on to consumers. SCI funeral homes are among the most expensive, according to consumer advocates and funeral industry experts. Disgruntled customers and consumer advocates have accused SCI of overcharging, aggressively pushing excess expenses on the bereaved and even overbooking plots in some of its cemeteries. SCI has said it is comparable to other providers and offers good products at a variety of price points for all customers.

“The consumer is in a uniquely vulnerable position,” Slocum said. “We know very little about what we’re buying and what our options are. Most of us are doing it under emotional duress.”

Vladimir Belostotsky is a case in point. When his mom died unexpectedly in 2008, Belostotsky brought her body to the nearest funeral home to where he lived. He didn’t know it was an SCI facility. SCI funeral homes often keep the original family names.

“It was the day when my mom died, the same day. I was helpless. And I couldn’t discuss with them the price,” Belotosky said. “When I tried to ask, ‘What is this for?’ the guy with whom I spoke said if you don’t like it, you may take the body and pay $500 for body pickup from the hospital and go to another funeral home.”

He went through with the funeral. The next month he had recovered from his grief enough to look at the bill, which totaled over $9,000.

Moreover, he said he was charged for services that the funeral home didn’t perform, including refrigerating his mother’s body. After Belototsky wrote to the Maryland Board of Morticians and called a lawyer, the funeral home agreed to deduct $4,000 from the price. But he remains resentful to this day.

“They take advantage of people in need,” he said.

SCI said it could not speak to the specifics of Belostotsky’s claims, citing customer confidentiality.

Planning ahead

A Bureau of Consumer Protection rule requires funeral homes to offer itemized lists of services and allow customers to buy services individually. SCI has been repeatedly accused of failing to do that.

Complaints about SCI funeral homes overcharging and overselling abound. Slocum said the Funeral Consumers Alliance has received far more complaints about SCI than any other death-care company in the country — and that is not just because of SCI’s size.

Lisa Marshall, SCI’s managing director for corporate communications, questioned Slocum’s sample and said complaints about upselling could be avoided if customers came up with “pre-need” plans — organizing their funerals while they are still alive.

“All the things that you hear about SCI can be easily dismissed if a smart consumer makes a plan early,” she said.

Despite the complaints and protests, Marshall said an overwhelming majority of SCI customers are satisfied.

“We send every client’s family that has an at-need service a customer satisfaction survey that is administered by JD Power,” she said. “Today we’ve sent over 600,000 surveys out and 95 percent of the people who return them say they would recommend our firm to a family member or a friend.”

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