The state quietly kept its hands off the funeral industry for more than a decade. It wasn't until last summer that this seemed like a terribly bad idea. Acting on a tip, police detectives paid a visit to a garage attached to the Wade Funeral Home in New Haven. What they found in the garage required an iron stomach: decomposed bodies of five people, all of whom had been dead for more than three years. Authorities charged the owner with five counts of improper disposal of a body. It also turned out that the funeral home had been operating without a license for more than a year.
Badly embarrassed, Connecticut has its inspection program up and running again. Two full-time staffers are on board now, performing annual unannounced funeral home inspections. The state is also considering new rules that would require better tracking of bodies from death through interment. Meanwhile, lawmakers, consumer advocates and even some funeral directors are struggling to understand how clear and reasonable regulations could be ignored for so long.
Connecticut's benign neglect of the death care industry is troubling not simply because it ended in a grisly scandal. It's troubling because it's typical. State regulation of funeral homes, cemeteries, crematories and casket makers is in shambles. Oversight, where it exists, is full of cracks, and enforcement is a low priority. States are doing little to make sure consumers aren't ripped off at their most vulnerable time: while grieving for a lost loved one.
Never has the gap in oversight been clearer than it was this past February. At a crematory in north Georgia, investigators found the rotted remains of 339 people scattered in the woods. All had been sent there to be cremated. Startled families of the deceased pulled urns down from mantels to find cement shavings inside rather than ashes. It turned out that most crematories in Georgia were inspected regularly, but this one wasn't. It squeezed through a loophole exempting facilities that don't deal directly with the public.
To be sure, acts of such gross criminal negligence are rare, and it's possible that no law could fully prevent them. Yet even funeral practitioners admit that regulation of their industry is horribly broken.
The starting point is Americans' basic discomfort with death itself. You don't win friends discussing the subject at cocktail parties. And the taboos extend to lawmakers as well as the general public. Governors and legislators dream about establishing legacies of education reform or tax cuts, but few wish to make their careers on a morbid issue such as death care. "It's not on top of the priority list," says Diana Kurz, who owns two funeral homes in Connecticut and has been pushing for tighter oversight for years. "When you look at all the issues legislators deal with, caring for the dead is not as important as caring for the living."
The result of this apathy is a sluggish 50-state regulatory regime that can't keep pace with a changing industry. Despite the growing popularity of cremation, only half the states license and inspect crematories. Nearly all states regulate funeral homes, but only one- third keep an eye on cemeteries. The feds do nothing beyond requiring funeral homes to tell customers up front what their prices are. This "funeral rule," however, doesn't apply to most cemeteries, crematories or the new breed of merchants selling caskets and monuments on the Internet.
The industry is now strongly influenced by several profit-driven chains, which expanded rapidly in the 1990s and control 15 percent of the death market nationally, and more in the retiree-rich Sun Belt. The largest is Service Corporation International, a Houston-based company that owns 3,099 funeral homes, 475 cemeteries and 177 crematories in 11 countries. Such integration drove prices up, not down. The chains keep old family names on facilities, leading consumers to think they are shopping around when they are merely visiting different branches of a single firm. And an aggressive push by chains to pocket money from pre-paid funerals has some in the industry worried that a death-business Enron may be lurking in their midst.
The chains have found it especially easy to slip through regulatory cracks. Death care is a stepchild divvied among state agencies for whom funerals are rarely the primary concern. Florida is a good example. Where in the bureaucracy do cemeteries fall? For now, under the Comptroller's Office. But most funeral home activities and crematories come under a different agency, the Department of Business and Professional Regulation. A separate cemetery board and funeral board issue licenses and sanctions, but these, as in most states, are tools of the industry. Each board is stacked with industry representatives, a fox-guarding-the-henhouse setup that invites weak enforcement and soft penalties for wrongdoers.
And Florida is considered one of the stronger states. The weakest is Colorado, which doesn't register, license or inspect death facilities at all. That means anyone can open a funeral home, cemetery or crematory tomorrow--no questions asked. State Representative Debbie Stafford proposed changing this after the gruesome findings in Georgia, but industry opposition killed her bill. "I was shocked that some of my colleagues found this a humorous topic," Stafford says. "When we lose a loved one, what we remember is that physical body, and dignity and respect needs to be offered in the care of that body. If you want to joke, that's fine. Until it's your mother getting buried."
Part of the problem with regulating death care is the industry's own mixed agendas and internal rivalries. To the average consumer who shops for only one or two funerals in a lifetime, funeral homes and cemeteries may seem to be part of the same institution. In state capitals, however, morticians and cemeterians are bitter competitors. Where they are regulated, states almost always handle them separately.
There's some basis for this. Traditionally, funeral homes play a public health role by preventing the spread of disease. Many states, therefore, place regulation of funeral directors and embalmers under the health department, with their own board for oversight. Cemeteries, on the other hand, are historically viewed as sellers of land. Consequently, their regulators are found in unlikely corners of the bureaucracy, as in Arizona, where cemeteries fall under the Department of Real Estate. Other states fold graveyards under agencies that monitor securities or banking, since cemeteries have to keep trust funds for maintenance.
Mutual resentments reinforce this separation. Morticians pride themselves on being well educated and well trained and value their front-line role as grief counselors to families. They view cemeterians as unprofessional. Cemetery interests begrudge the smug attitude and counter that funeral homes capitalize on their customers' sorrow to boost sales. This row plays itself out in almost every issue that affects death care.
It's been especially hot in recent years as cemeteries and Internet retailers have begun moving in on a big source of mortuary profits: casket sales. Funeral home lobbyists and their allies on state funeral boards have protected their territory. Virginia, Louisiana and five other states allow only funeral homes to sell caskets. Maryland state Senator John Astle says this tit for tat has been going on as long as he can remember. "For the 20 years I've been in the legislature, there's been this turf fight between cemeterians and morticians, and it's never satisfactorily resolved," Astle says. "The cemeteries want to sell caskets. The morticians say, 'No, we sell caskets, we don't want you selling caskets.' Both are struggling to be the big dog."
Maryland is a good example of how all the squabbling leads to inertia. A bill to regulate crematories failed in the legislature this year. This might seem a curious result, considering that the Georgia atrocities were making national headlines at the time. Across the country, the Georgia case touched a nerve. It not only exposed weaknesses in state oversight but shattered faith in the very idea of a "final resting place."
Furthermore, Maryland crematories are almost completely unregulated. The only thing the state monitors is the air pollution going up the smokestack. Nobody inspects the incinerators, checks the records or makes sure that ashes aren't being mixed up. Nor does anybody track consumer complaints or answer consumer questions about cremation, despite its growing popularity. It used to be that almost every funeral in Maryland involved a casket burial. Now cremation accounts for one in four.
Maryland legislators had debated cremation before, but the issue seemed more important than ever after the Georgia case. The question was, who would perform inspections? Maryland has 24 crematories, the majority of them owned by funeral homes. Funeral directors wanted their own regulators--the morticians board--to do the job. Cemeteries run several cremation facilities themselves, however, and preferred oversight by the cemetery board instead. The bill that emerged would have given both sides what they wanted. Jurisdiction over crematories would be split between the two boards. And the House passed it 137-0.
But it died in the Senate, where a key committee chairman insisted that one board, either the morticians or the cemeterians, would have to take charge. Neither side could bear the thought of oversight by the other. Their mutual disdain, as it often has, resulted in inaction.
Fragmentation and turf fighting may serve the industry's interests, but they do little for consumers. One solution is to combine all aspects of death care regulation under a single agency. Not many states have been willing to consider this. Only three--California, Minnesota and Oregon--have managed to institute it with some degree of success.
For consumers, this makes it easier to figure out where to send complaints. It also makes sense as the industry's traditional fault lines begin to blur. With national and regional chains owning all the pieces--funeral homes, cemeteries and crematories--an integrated approach can fill in the oversight cracks. "Having a unified board has done a lot toward avoiding problems other states seem to face with competition between one board and the other," says David Koach, executive director of the Oregon State Mortuary and Cemetery Board. "It serves the industry well and it serves the consumer well." Only after Oregon's own crematory scandal back in 1984, however, was the change politically possible.
Nowhere is the issue of integration more important than in Florida. The Sunshine State is grappling with its own funeral scandal and many think fractured oversight is to blame. A pair of cemeteries there are accused of burying bodies in the wrong plots, selling the same plots twice and crushing burial vaults to make room for more bodies. The cemeteries, known as Menorah Gardens, are owned and operated by Service Corporation International.
An audit this past March spelled out the problem. The Florida comptroller has placed cemetery oversight under the Department of Banking and Finance. Naturally, banking regulators are more consumed with banks than burial plots. Signs of trouble at Menorah Gardens had shown up as early as 1996, according to the audit, but the department never followed up on them. Furthermore, a cemetery board dominated by industry interests had not levied any fines against Menorah Gardens or suspended its license. "It's too easy for problems to fall through the cracks," says Bill Swain, who lobbies on behalf of consumers in Florida. "The lines of responsibility are not clear."
The audit concluded that all oversight of the death business should be placed within one agency. A Senate bill to do just that passed this year, but went nowhere in the House. Just as in Maryland, industry rivalries thwarted the effort.
Experiences such as those have convinced many legislators, in Florida and elsewhere, that unified regulation will never achieve widespread acceptance. "From a regulatory point of view, it would be much simpler," says Maryland's John Astle. "But the politics would be impossible. They just don't like each other. The level of emotion stirred by this turf battle is astounding."
Florida is a flashpoint for another growing area of concern: pre-paid funerals. It's nothing new for consumers to arrange and pay for a funeral before they die. But in recent years the chains especially have pushed this option hard. They have adopted aggressive marketing tactics and send platoons of commissioned sales people out into the field, largely into retirement communities. The result is that about one in three Americans over age 50 have pre-paid some funeral costs, and about $25 billion worth of goods and services have been paid for but not yet delivered.
At first, the chains viewed pre-payment largely as a way to build market share for the future. But increasingly, they have come to rely upon these sales for cash flow. During the 1990s, chains paid handsomely to snatch up funeral homes, cemeteries and crematories around the country. Some of them paid too much. One chain, Canadian- based Loewen Group, filed for bankruptcy protection in 1999 (it has since re-emerged under the name Alderwoods). SCI and New Orleans-based Stewart Enterprises, meanwhile, are selling off some of their new properties and badly need pre-paid money to help pay down debt.
When a customer buys his funeral in advance, the money goes into a trust account until he dies. But state laws on these accounts vary widely. Like many states, Florida lets the funeral home or cemetery-- not the consumer--keep the interest. Industry lobbyists have also persuaded numerous states to let them pocket part of the pre-need money up front. Florida requires that only 70 percent of the money paid in advance for funeral and cemetery services be put in trust. The company can spend the rest. Even less is required on merchandise such as grave markers and burial vaults.
And the chains have found ways to get their hands on the trust money as well. Some states let them post a surety bond, essentially an IOU, in lieu of placing pre-paid funds in trust. Florida is one of those states. In 2000, for example, regulators let SCI and Stewart Enterprises pull $84 million out of trust in exchange for surety bonds.
What all this means is that funeral companies are taking profits today on funerals they won't have to provide for another 10 or 15 years. Florida state Representative Mark Weissman likens this to a ponzi scheme. "Where are the dollars going to be down the road when they have to deliver all these services?" he asks. "Sales must continue at the same or greater pace year after year just to cover the cost of delivering what was already obligated."
Weissman himself used to be in the funeral business; in fact, he sold Menorah Gardens to SCI before the troubles there began. His biggest fear is that the pre-need market will inevitably become saturated. As customers pass away and their funeral bills come due, companies may be forced to cut services and staff. Worse, they could go bankrupt. Florida has a $2 million "guarantee fund" for such an eventuality, but it would be overwhelmed if a major company began defaulting on pre- paid funerals. "It's not designed for something of this scale," Weissman says.
The chains say these fears are way overblown. The Loewen Group came out of bankruptcy without having defaulted on a single funeral. For its part, SCI says it places 90 percent of its pre-paid money in trust, much more than Florida requires. "We've never had a contract we haven't been able to honor," says Dan Garrison, SCI's vice president of North American cemetery operations. "Nor is there any evidence that the backlog of prearranged services will not be honored."
Still, when Weissman proposed this year to require placing 100 percent of the pre-paid funds in trust, most of the industry balked. The bill never got a hearing. "The scandals in Florida are directly related to the aggressive sales of pre-paid contracts," Bill Swain says. "What happened at Menorah Gardens is they oversold the cemetery. When Aunt Mabel's family shows up and you don't have the grave space Aunt Mabel paid for, you're in big trouble."
