First of two articles

Casket by casket, grave by grave, funeral by funeral, death in the Washington region is being transformed from a small business into a big industry.

Long characterized by family-owned funeral homes and cemeteries, the area's lucrative "death care" trade is increasingly dominated by three multinational companies -- with consequences that range from increases in the price of dying to the aggressive mass marketing of eternal rest.

Attracted by Washington's demographics, including a growing number of older residents with above-average incomes, the funeral industry's "big three" -- the Houston-based Service Corporation International (SCI), the British Columbia-based Loewen Group Inc., and the New Orleans-based Stewart Enterprises Inc. -- have bought out about 32 enterprises in the Washington area.

Together, they now own an estimated 149 cemeteries and funeral homes throughout Maryland, Virginia and the District.

The corporate chains have been particularly successful in acquiring large, full-service suburban funeral homes and in cornering the cemetery market in targeted areas. The big three now own eight of the 15 full-service homes in the Northern Virginia suburbs, for example, and three of the five biggest non-church-affiliated cemeteries there. They own six of the nine secular cemeteries in Prince George's County, including two bought this month.

Similar consolidation has occurred in other regions -- Florida is a notable case in point -- as the big three tighten their grip on the $15 billion-a-year U.S. death industry in anticipation of a business surge. As Stewart noted in its 1995 annual report, "On January 1, an historic event occurred: the first Baby Boomers turned 50 {and} represent a most receptive audience." SCI's annual report likewise noted the inevitable demise of the boomer generation under the headline "A Predictable Future."

Because the chains preserve the names of the funeral homes and cemeteries they buy, the transformation of an essential service industry around Washington has attracted little public notice. But the effects are felt by many paying for even a routine funeral and burial here, a Washington Post investigation of funeral and cemetery pricing shows.

Since the big three began penetrating the regional market in earnest earlier in the decade, many fees for funerals and cemetery fees have climbed steeply -- sometimes even doubling after a corporate takeover. Corporate prices for funerals and burials in greater Washington far exceed national averages.

Along with spiraling prices have come sophisticated marketing techniques, such as telephone sales campaigns touting "pre-need" purchases and, in the case of one corporation, the solicitation of customers through local churches and clergy, who are entitled to a cut of the profit. The practices have generated consumer complaints, while putting intense competitive pressures on independent owners and ancillary funeral businesses such as gravestone vendors.

Unlike the pharmacy giants that muscled out corner drugstores by offering lower prices, the "consolidators" -- as the death care conglomerates call themselves -- have turned a basic law of economics on its head: Their prices are almost always higher than those of independently owned competition in this area. They have captured an increasingly large share of the local market -- and gained control of about 15 percent of the nation's death care industry -- through intensive marketing and streamlined service, and because customers tend not to shop for bargains at a time of personal grief.

The corporations say they have raised professional standards. SCI spokesman Bill Barrett noted that consumers know they are going to pay more for a hotel room at a Marriott than at a Motel 6 and accept the disparity as a free market choice; the same should apply, he added, to funeral services.

Representatives of all three chains said that their prices are fair and structured to recoup major investments in acquisitions and renovations. Moreover, Barrett added, chain funeral homes can offer better service because of specialized personnel. In family operations, "the person doing the prep work in the morgue is the same person shaking your hand when you come in the door."

The corporate impact on pricing for an individual funeral has been substantial. One indicator is the standard handling fee -- or "non-declinable professional service charge" -- levied by funeral homes to cover overhead costs. Nationally, the average funeral "cover charge" -- as it is known in the trade -- is $1,025, according to industry surveys. Most independent funeral homes in greater Washington charge close to the national average, price lists indicate.

But a survey of large corporate funeral homes in Northern Virginia shows that cover charges average $1,786, well above both the national average and the average fee of $1,021 charged by independent funeral homes there.

Similarly, prices for complete funeral packages often have climbed after a corporate takeover. A basic funeral and 18-gauge coffin at Demaine Funeral Home in Alexandria cost about $3,800 before SCI, the world's largest death care provider, bought it in 1992, estimated Carter Wagner, the funeral home's former manager. Today, a similar basic funeral package at Demaine costs more than $7,600, price lists show. Consumer prices during that same period rose only 14 percent, according to federal statistics.

In another indication of the impact of corporate ownership, prices at Washington National Cemetery in Suitland soared when Loewen, the second-largest death care company, bought the facility last year from local owners. Charges for many gravesites virtually doubled overnight, prices before and after the takeover show.

The publicly owned chains stress that they try to replicate the tradition of community service offered by locally owned cemeteries and funeral homes, while delivering quality service and handsome shareholder profits.

Funeral merchandising is hardly a new phenomenon. Author Jessica Mitford documented egregious abuses in her 1963 expose, "The American Way of Death." But latter-day practices, including boiler room telephone banks and mass mailings, come as the corporate chains are buying out independents in places such as Washington. Mitford, who was updating her book when she died last year, described corporate takeover of independent funeral establishments as a "devastating change," bringing higher prices, greater sales pressure and more merchandising.

"They are not doing anything different than General Motors or the Gap," said Wagner, who now owns Advent Funeral and Cremation Services in Falls Church. "But they are doing it at a time when people are very vulnerable." Takeover Transformation

The death industry's transformation is vividly illustrated along a strip of Suitland Road in Prince George's County, a little death row that offers a concentrated shopping area for funeral and cemetery services.

Cedar Hill Cemetery sits beside Marshall's Funeral Home, which is a few yards from All Stone Memorial, a headstone shop. Just across the road, Lincoln Memorial Cemetery's property abuts Washington National Cemetery.

In the last two years, Loewen has come to virtually monopolize business along the strip. It owns all three cemeteries and is opening a funeral home on Cedar Hill's grounds, part of a "combination" approach to death services that is prevalent among the chains. Marshall's, a black-owned funeral home that has long served the African American community, rebuffed a buyout offer from Loewen, a move that is in keeping with broad resistance nationally by black funeral home owners toward corporate ownership.

But even firms that have remained independent have felt the impact of Loewen's presence. David Blackmon, the owner of All Stone Memorial, complained recently in an interview that fees for access to corporate properties have left him "barely hanging on." A Loewen spokesman said fees for independent dealers to work on the grounds have risen modestly and are in line with those charged by other cemeteries.

The corporate effect on cemetery prices is documented in the Prince George's County Office of Regulatory and Consumer Affairs, where owners must file price lists for public review. Those records show that prices escalated after 1990, when a Philadelphia company, Osiris Corp., bought two of the Suitland Road sites from local owners. A $450 plot jumped to $1,540 and discounts for hardship cases ended immediately.

Loewen in 1995 bought out Osiris, thus obtaining Cedar Hill and Lincoln Memorial. Last year, Loewen purchased Washington National from a Maryland family and prices there quickly surged, the documents show. Grave digging -- known as an "opening and closing" in the trade -- jumped from $595 to $830. The least expensive plot -- priced at $484 -- rose to $990. A more attractively located plot, in the Garden of the Last Supper, cost between $660 and $880 in 1995; in 1996, under Loewen, it cost $1,732, price lists show.

Some funeral directors and former chain employees complain that along with the higher prices, sales pressures have increased. Some say they found the tactics promoted by chain management to lure customers to be so objectionable that they quit their jobs.

Wagner said that when SCI took over Demaine, it began requiring "cremation families" to perform superfluous identifications of their loved one's remains in the hopes, he said, "that you wouldn't want to see your mother in a cardboard box and would buy a nice casket." Earlier this month, the Funeral and Memorial Societies of America, a consumer watchdog group, complained to the Federal Trade Commission that SCI's identification policy "is just a ploy to sell more expensive cremation containers."

SCI spokesman Barrett said the identification is not a sales ploy but a safeguard to protect the company from making mistakes.

Critics also assert that corporate owners more often than independents require families to visit the cemetery 24 to 48 hours before a burial, ostensibly to finalize details that were once routinely handled by funeral directors. The tactic, former employees say, is a way to lure bereaved families in order to pitch merchandise such as upgraded plots, vaults and headstones.

"They say it's to finish paperwork," said Tom Murphy, president of the Maryland State Board of Morticians. "But it's really a way of saying, Bring your checkbook while you're feeling vulnerable and confused.' "

Both Loewen and SCI facilities use "Update Programs," in which cemetery customers are asked to come in and update records. Former SCI employee Chris Walker, who now works for a low-cost coffin company, said the SCI-owned King David and National Memorial Park cemeteries in Falls Church ran advertisements, including some in The Washington Post, saying that a new computer system required new data.

When customers showed up, Walker said, they received an intense sales pitch that employees called "beating them up." If a customer resisted, she said, the sales counselor was instructed to bring in a "takeover person" to rachet up the pressure. The rewards for sales success were sweet, Walker added, and a counselor who sold more than $175,000 worth of burials won a trip to the Bahamas.

SCI's Barrett said that if customers were told there was a new computer system, there must have been. "This company is not in the practice of generating bogus scenarios to generate sales," he said. While Barrett said SCI would do nothing to alienate customers by unduly pressuring them, he added that "if cemeteries sat and waited for people to walk on the property and ask to buy something, we probably wouldn't be very successful."

After her 15-year-old stepdaughter died in a car accident, Sharon Kielek said, a salesman from an SCI cemetery in Baltimore, where the big three now dominate the cemetery market, borrowed a funeral registry book listing about 300 attendees. He then mailed out solicitations, saying he had counseled the Kieleks and could help with pre-need funeral planning. Even Kielek's 12-year-old niece received a letter and discount coupon.

"People were horrified that this man would take such a tragic situation and use it to drum up business," said Kielek, who told her story to a state legislative task force this year. SCI's Barrett said that both the "overaggressive salesman" and the cemetery management later apologized to the family.

Lisette M. Jones, of Baltimore, wrote to the Maryland attorney general's office this year that she and her mother were subjected to sales pressure while visiting the family plot at Stewart-owned Loudon Park Cemetery. Jones said cemetery personnel tried to convince them to install a $250 flower vase, saying it was a new requirement, and to book funerals in advance to guard against rising costs.

Brian Marlowe, president and CEO of Stewart's Eastern Division, said the sales pitch was "something that was done in an effort to market our new funeral home and an incentive for our customers."

Some objections to corporate tactics have centered on pre-need sales, which have become a huge segment of the industry. Pre-need customers generally must be identified, targeted and persuaded. The big three use telemarketing targeted at people over age 50.

Some consumers complain that persistent phone calls from cemetery sales agents are not just a nuisance but cruel reminders of loss. Nona Green, of Bladensburg, recently complained to the Maryland attorney general about calls from Washington National Cemetery that began soon after she buried her sister there.

"Could you please help me make these people stop harassing me?" she wrote. Loewen spokesman David Laundy said he was unaware of complaints, adding, "Our policy is not to be persistent with people who do not wish to continue the discussion." To Some, a Godsend

For many beleaguered cemetery and funeral directors, corporate penetration of the local market has been a godsend. The Everly family of Fairfax is a case in point.

John Clark Everly, 63, literally grew up at his father's Everly Funeral Home, where his mother styled hair in the morgue and baked a cake for every bereaved family. The funeral home was one of Northern Virginia's most reputable, still thriving when Everly's son, Joe, now 34, moved into the family business.

But as the Everlys expanded to two locations, work demands left the owners weary. In the late 1980s, they heard that Stewart was buying funeral homes in other states and keeping on owners as managers. The family sold in 1990 for an undisclosed price, becoming the first family-owned funeral home in Northern Virginia to sell to a chain.

The acquisition of Everly's, quickly followed by buyouts of other established funeral homes in the region, was in keeping with a nationwide strategy by the chains to move into select markets, tentatively at first, then with accelerating consolidation.

All three large chains operate under what they call the "cluster" principle, buying more than one facility in an area to share operating costs and maximize profits. Hearses and limos, for example, use central transportation facilities. Bodies are collected by individual funeral homes but processed through a central morgue.

The Everlys saw Stewart's operating methods as a way to give customers superior service while allowing the family a respite from relentless business demands. Stewart's experts manage the accounting, order and display funeral merchandise and finance renovations. Chain management also meant the end of round-the-clock hours for the family, because phone calls are routed through an answering service and Stewart funeral directors rotate shifts to handle after-hours business.

John Everly said he found his health improved. And while critics of the chains complain that they have made the industry less personal, he found that he could concentrate on what he enjoys best about the business -- meeting with families.

At Everly's, the transition to corporate ownership also brought changes in the style and substance of the business. Merchandising is a practiced art within the chains, which closely watch death trends and market products. As SCI's Barrett explained, "We all are in the business to make money. It's just that some of us do it better than others."

Cremation, for example, was once eschewed by the trade as a low-cost practice with proportionately low profits. But public demand has eroded that resistance. Cremations now account for about 20 percent of all "disposals" nationally -- a figure predicted to reach 40 percent by 2010, according to the National Funeral Directors Association. While heeding that demand, funeral home chains have been particularly determined to increase cremation profits.

Before Stewart took over, Everly's offered little cremation merchandise. Now, it has a separate showroom featuring viewing caskets costing up to $3,510, bronze-lined urns for $1,875 and copper vaults -- to hold the urns -- priced up to $1,175.

Stewart also upgraded and rearranged Everly's main Fairfax showroom to offer customers to a broader line of traditional merchandise, with pricier items commanding the most prominent display. During a recent visit, a $765 coffin made of "compressed material" was parked in a dark entryway behind a closed door, while the showroom's centerpiece was a $10,500 bronze coffin.

Corporate funeral owners say their merchandising practices are like those of any retail business.

Everly's least expensive coffin, an 18-gauge steel with velvet interior -- the standard the National Funeral Director's Association uses when calculating the national average funeral cost -- is $3,295. The national average is $2,146, according to the association.

Joe Everly insisted his prices are not out of line with other local homes, including some that are still independently owned. But The Post's price review shows that while Everly's generally is the second lowest priced of the chain-owned homes in Northern Virginia, its prices are higher than any full-service independent there.

A funeral package at Everly's -- which includes casket, viewing and services but no limo, flowers, vault or burial -- costs $6,445 with a package discount, compared with the $4,624 national average and the local independents' average price of $4,833. Joe Everly called his price an "excellent value." Independents React

Although the chains attracted little notice as they penetrated greater Washington, a delayed reaction has begun.

In February, Richmond funeral director Blair Nelson formed the Independent Funeral Directors of Virginia and urged state lawmakers to create a task force to study corporate ownership's competitive impact.

Nelson and other independents argue that because funeral homes are more regulated than cemeteries, the chains with combos -- funeral homes located on cemetery grounds -- have an unfair marketplace advantage. For example, cemeteries may telemarket, while funeral homes may not. Funeral homes also must offer refunds and must place in escrow larger amounts of money paid for pre-need merchandise, such as vaults, that both funeral homes and cemeteries sell. However, a task force draft report this summer recommended no changes.

The Independent Funeral Directors of Maryland also was formed this year and -- along with a self-styled cemetery watchdog group named Eternal Justice -- successfully lobbied to establish a state oversight board. It will write new regulations and serve as a clearinghouse for complaints.

Perhaps the most effective resistance to consolidation has come from individual owners who simply reject corporate approaches -- such as 70-year-old Berkley Green, of Green's Funeral Home in Herndon.

In the heated market created by consolidators, Green has been approached by the chains and said he knows he could "walk out a millionaire." But Green said he is content with his volume and would never fit into the corporate culture. "They're out to make money," he said, "and I'm just here to make a living."

But Stewart's Marlowe said the chains offer an important "succession planning" service for many elderly funeral home owners who have no heirs willing to take over their businesses.

In a few instances, the Federal Trade Commission has stepped in to thwart corporate acquisitions that could strangle competition and drive up prices. In two 1995 agreements, SCI agreed to sell certain properties in Texas, Florida and Oregon after purchasing two smaller chains in those states.

Last year, Loewen agreed to divest itself of funeral homes in parts of Texas and in Castlewood, Va. The FTC charged in the Virginia case that Loewen's acquisition of a smaller chain would result in a company monopoly in the town, according to agency documents.

The FTC reviews cases in which consolidators buy out a company with more than $10 million in total assets. But facilities bought one at a time do not trigger FTC review.

In Baltimore, an association of independent funeral homes urges members to use a "family owned" logo on printed death notices and has run advertisements touting non-chain funerals. Yet similar appeals elsewhere in the country have not turned out as planned.

In West Palm Beach, Fla., for example, a group of family-owned firms ran newspaper advertisements in 1993 to heighten awareness about chain ownership. But the ad campaign fizzled within a year because nine of the 12 participating funeral homes were sold to chains. Tomorrow: Penetrating the African American death care market. CAPTION: Profiles of the Big Three Across the nation, the death care industry is increasingly controlled by three publicly traded multinational corporations. These companies now control an estimated 15 percent of the nation's funeral homes and cemeteries. In the Washington suburban area, the companies own 32 facilities, including most funeral homes and cemeteries in Northern Virginia and most cemeteries in Prince George's County. They also dominate the cemetery business in Baltimore. Service Corporation International SCI, the world's largest death care corporation, began in 1962 as three Houston funeral homes and first sampled the Washington market with the purchase of Joseph Gawler's & Sons Inc., the prestigious home that conducted John F. Kennedy's funeral. Worldwide, the publicly-traded company now owns 2,882 funeral homes, 345 cemeteries and 150 crematories, with revenue last year of $2.3 billion. The company spent $380 million on acquisitions in 1996. SCI has concentrated holdings in the Baltimore market, where it owns 12 funeral homes -- including 10 bought or built since February 1996 -- and eight cemeteries. SCI handles one of every 10 deaths in the United States and, as its annual report notes, "from Anchorage to Avignon, from Galveston to Glasgow, from Montreal to Melbourne, the sun never sets on SCI." The Loewen Group INC. The Loewen chain began modestly after Raymond L. Loewen, son of a Manitoba funeral home owner, followed the purchase of several funeral homes by expanding into the U.S. market and offering public shares 10 years ago. The company now owns 984 funeral homes and 356 cemeteries in the United States and Canada. Loewen's acquisition pace is quickening; the firm spent $1.2 billion last year on acquisitions. Next year, the company will attempt "to make sure Loewen captures all the acquisition opportunities in the North American market," Loewen recently told investors. Loewen's board rejected a hostile takeover bid by SCI in October 1996 and last year posted record-breaking revenue of $908.4 million. Stewart Enterprises Inc. Still by far the smallest of the big three, the company's stock prices have risen 334 percent since it went public in 1991. Based in New Orleans, Stewart has expanded to 23 states, Puerto Rico, Mexico, Australia and New Zealand, with properties that include 308 funeral homes and 121 cemeteries. Last year, its revenue was $433 million. Stewart pioneered the "combination" concept in which funeral homes are built on cemetery grounds to reduce costs and offer customer convenience. Stewart anticipates spending $200 million on acquisitions this year. CAPTION: The Corporate Approach to Death Merchandising Pre-need Sales: The three large death care conglomerates see revenue opportunities by marketing advance, or "pre-need," sales to aging Baby Boomers. Consumers benefit, the companies say, by contracting for future cemetery space at current land prices and by using rational decision-making to shop for funeral and burial products. Most states require the death care companies to protect pre-need customers by placing a percentage of the money from the sales in an escrow or insurance fund. Cremation: Cremation traditionally has been the low-cost alternative to burial, but the big three describe the growing U.S. demand for cremation as an opportunity for creative merchandising. Cremation showrooms at corporate-owned funeral homes feature special coffins made of highly flammable materials, expensive urns and vaults, even cremation jewelry for holding a loved one's remains. "Families can select from a variety of memorialization options, including personalized bronze plaques, dedicated benches and rock gardens, niche walls and engraved granite tablets next to special memory walks," SCI's annual report says. Combinations: A funeral home located on cemetery grounds -- known in the trade as a "combination" -- "reaches profitability much faster than a stand-alone facility," Stewart Enterprises explains in its annual report. "It benefits immediately from the brand awareness and loyalty of the existing cemetery owners, who are themselves prospects for the sale of prearranged funeral services." Each of the big three is using the combination approach to maximize profits. Consumers benefit, they contend, from the convenience of one-stop death care shopping. Higher revenue per customer: All of the chains experience occasional drops in business, but they have been able to keep profits high by maximizing sales to individual customers. Product lines offered at chain-owned funeral homes are extensive, and sales staff are trained to cater to individual needs. SCI reports that "Asian families are offered caskets with special hardware featuring symbols of good fortune and longevity, Native American . . . families can choose caskets featuring cultural art or decorative wool blanket linings." When customers are well informed about a product's construction and prices, the company says, "they often opt for merchandise and services of higher quality to honor the lives of their loved ones." Community Outreach: Each of the three consolidators wants to preserve the image of the neighborhood funeral home as a vital part of the community it serves. SCI's annual report pictures Scout groups touring a local funeral home with the funeral director answering questions. Loewen's report to shareholders shows antique photos of prestigious local funeral homes that were bought out by the chain. SCI affiliates offer grief support for families through a "Picking up the Pieces" program that includes videos and booklets on counseling children and dealing with sudden loss. CAPTION: Visitors entering Washington National Cemetery in Prince George's are greeted with a sales pitch for crypts. CAPTION: John Clark Everly, 63, with son Joe. The Everlys' business was the first family-owned funeral home in Northern Virginia to be sold to a chain. CAPTION: ravediggers work at Lincoln Memorial Cemetery in Prince George's County. The cost of services increased with corporate ownership, price lists show. CAPTION: Cedar Hill Cemetery is one of three along a strip of Suitland Road in Prince George's that were bought by the Loewen Group. CAPTION: Eternal Justice, a self-styled cemetery watchdog group, held a vigil last year to protest practices at Lincoln Memorial Cemetery on Suitland Road. CAPTION: "They are not doing anything different than General Motors or the Gap," says funeral home owner Carter Wagner. CAPTION: THE CORPORATE PRESENCE (This graphic was not available) CAPTION: Revenue per customer: Pendants to carry cremation ashes ($50 to $950) and a mausoleum (starting at $39,900). At far right, a coffin catalog.