The most frequent question I am asked about the volunteer work I have done for the past seventeen years on behalf of funeral consumers is “Why do funerals cost so much?” While there is no simple answer to this question, I usually start answering it by explaining what I understand about the structure of the funeral industry.
In this case, using the example of San Marcos illustrates what we find in most areas of the country.
Three funeral facilities are in San Marcos: Los Angeles, Pennington, and Thomason. No one is compelled to use a local funeral home for services, but most people do, especially if they want to use the establishment’s facilities for any funeral events.
To explain how the industry works, I will assume that deaths that occur in the greater San Marcos area are handled by funeral homes located in San Marcos. It is reasonable to assume that there are as many families in San Marcos who use out-of-town funeral providers as there are out-of-town families who use San Marcos funeral providers, so the figures tend to even out.
The Texas Department of State Health Services reports that in 2005 (the most recent year complete data are available), there were 218 deaths in San Marcos and the immediate surrounding area. Industry sources report that in recent years, about 140 deaths of people from, or related to, San Marcos occur in hospitals and nursing facilities out of San Marcos and are not included in the official death statistics for San Marcos. These deaths bring the total San Marcos-related deaths handled by San Marcos funeral homes to around 358 per year, an average of 119 deaths for each funeral facility, about the same as the statewide average of deaths per funeral facility in Texas.
As Ernest Morgan, the author of Dealing Creatively With Death (now in its 14th edition), first noted about fifty years ago, most funeral homes in the United States operate at less than their full capacity.
If each facility worked eight hours a day, five days a week, fifty weeks a year (with two weeks off for vacations and holidays), it would have 250 work days. Some funeral homes can handle as many as three or four funerals a day. It is not unusual for a funeral home to have two or three bodies lying in state at one time. Certainly, handling one funeral a day, five days a week, would not overload any of the three facilities in San Marcos. But they are handling fewer than half this number of services because there are too few San Marcos-related deaths to keep facilities busy full-time.
A problem for underused funeral homes is that they all have overhead and operating expenses that don’t stop just because they aren’t handling a funeral several days a week. Utility bills, staff salaries, vehicle payments, insurance costs, taxes, mortgages, maintenance costs, etc., don’t stop just because there aren’t enough customers.
None of the San Marcos funeral establishments advertise their prices or try to compete with one another by lowering their charges, the way most businesses promote themselves. They don’t compete on price because they need to take in a certain amount of money to pay their fixed overhead costs, and they don’t think they can stay in business if they lower their prices. A typical marketing approach for funeral homes involves funeral directors and other staff joining or becoming involved with as many organizations in the community as possible, promoting the visibility of the business and creating good will. For years, this networking has substituted for advertising prices.
Because funeral homes don’t have enough business to lower their prices, and they follow expensive business models, their prices stay artificially inflated. In fact, some of the highest prices in the Austin area are charged by two of the funeral services operating in San Marcos–Pennington and Thomason.
Each year, the Austin Memorial and Burial Information Society (AMBIS), a nonprofit, nonsectarian, educational and advocacy organization, conducts a price survey of about 40 funeral establishments doing business in Hays, Caldwell, Bastrop, Williamson, and Travis counties. For several years, these two San Marcos funeral homes have charged the highest prices in the survey for “direct cremation.”
Federal regulations define direct cremation as “a disposition of human remains by cremation, without formal viewing, visitation, or ceremony with the body present.” Many people choose direct cremation and have a memorial service organized by family and friends at their church or at some other local facility.
A direct cremation is available to Hays County families from other providers in the Austin area for under $900, a price that includes the crematory charge. Pennington Funeral Home charged $2770 in January 2008 for a direct cremation; Thomason charged $3015, the highest in the survey; Los Angeles charged $1410. The Austin-area average was $1969.
The absence of open price competition, combined with an oversupply of high-overhead funeral establishments, keeps funeral prices high. The culture of the funeral industry has always mitigated against open price competition. The fact that several funeral providers in the Austin area charge about $2,000 less than is charged by two of the three funeral providers located in San Marcos for the same service is not widely known because of this lack of open price competition.
Over the years, I have grown to have some sympathy for the independent parts of the industry. All three of the funeral homes in San Marcos are in this category. Many people, I have learned, enter the funeral business out of a desire to help others in a time of need, and they need to make a living in the process. However, their willingness to follow a business model that requires them to overcharge families in order to make a living is a choice they have made. That fact tempers my sympathy for their predicament.
More consumer information about funeral choices and the complete 2008 AMBIS survey of funeral costs is at <http://fcaambis.org/>. Membership in AMBIS is open to anyone at no cost. A voluntary donation is requested to help with the work of providing valuable information to families in the Austin area.