Listen to this article

The industry considers charging for services now provided for freeSPRINGFIELD

Falling death rates and a generation’s move to low-cost cremations are crimping the profits of the funeral industry in New Jersey and elsewhere, according to a regional survey. To pump up their bottom line, funeral-home owners will have to revise their basic business model, says Ed Horton, the partner in charge of funeral industry services at Citrin Cooperman & Co., a public accounting firm in Springfield.

Instead of depending on sales of caskets and high profit-margin items, funeral homes should start charging for their knowledge-based services, such as counseling the bereaved and handling tasks not directly related to a funeral, Horton says. But bringing about change in the tradition-bound industry may be a challenge.

One item in the survey, commissioned by Citrin Cooperman, illustrates the challenge: although 44 percent of funeral-home owners cite the increase of cremations as their main worry, only 16 percent have either added such services or have increased their existing cremation activities.

“Overall, average funeral-home profits have decreased by up to 50 percent during the past 20 years,” says Horton. “Two prevailing issues are pressuring their profits: the continuing and substantial migration to cremation, and a national reduction in the death rate that’s expected to continue for more than a decade, when baby boomers will likely start to pass away in larger numbers.”

Unlike a traditional burial, which requires a casket and costly services like embalming, a cremation may be more of a simple affair. The Web site of Ocean Grove Memorial Home in Ocean Grove, for example, notes a traditional burial with funeral and graveside ceremonies can run $9,972, while a cremation with similar services would be about $4,000 less.

In New Jersey, an estimated 27.6 percent of all decedents were cremated in 2005, the most recent year available, according to the Cremation Association of North America. The Chicago-based trade organization projects New Jersey’s cremation numbers will rise to 32.1 percent by 2010.

“The move to lower-cost cremation, primarily driven by baby boomers, is permanently changing the funeral-home industry,” says Horton. “Funeral-home directors need to recognize that the most valuable service they render is not the burial itself, but rather the knowledge-based assistance they offer to the bereaved family members and others.”

He says directors should be charging for a range of services—from filling out financial assistance forms to assisting with end-of-life planning decisions—that are rendered for both traditional burials and cremations.

Adapting to change is a problem plenty of businesses have faced. And one answer, billing for previously “free” services, has been adopted by many industries, from gas stations that now charge customers for filling their tires with air to doctors who itemize and bill for every service they render so they can be reimbursed by health insurers.

The increase in demand for cremation doesn’t have to be seen as a negative, according to Marc O’Reilly, a spokesman for the New Jersey State Funeral Directors Association in Manasquan.

“Cremation does not have to mean fewer services,” he says, referring to traditional tributes and “celebration of life” activities that an increasing number of baby boomers are requesting. In such services, a funeral home may coordinate audio/visual and other displays that represent the deceased’s interests, and friends and loved ones may recount stories about the individual.

“Many of our members are beginning to focus on knowledge-based services,” O”Reilly says. “The focus is shifting to service-based pricing instead of merchandise-based pricing.”

The price list on Ocean Grove Memorial Home’s Web site, for example, lists a $1,465 charge for “Licensed Professional Services and Accompaniment to a Local Cemetery.” That fee reflects counseling services, as well as other activities, like filling out a death certificate, says an Ocean Grove representative.

But now funeral-home directors are considering whether they should move from a flat fee for counseling and other knowledge-based services to an a la carte model of billing. But even some funeral-home directors who agree with the concept say they’re hesitant to implement it.

“We’ve always helped families to complete Veterans Administration, Social Security and other forms, and we’ve never billed for it,” says Paul Ferguson Jr., 46. He’s a second-generation funeral-home director whose family owns the F. John Ramsey Funeral Home in Franklin in Sussex County, the Ferguson Funeral Home in the borough of Sussex and the Ferguson-Vernon Funeral Home in Vernon.

Ferguson says he’s seen profits slip as expenses climb faster than revenues, and as more people turn to cremation.

“Even though our business is growing, our profits are not as strong as they were decades ago,” he says. “As a result we’ve considered billing for our counseling services. But we’re not ready to do it just yet.”

Ferguson explains his hesitancy by noting his business involves interacting with people “at a very sensitive and emotional time, so it’s difficult to talk about price as if they were just buying something impersonal, like groceries. I still need to learn more about it before we start billing for our knowledge. The first time we offer it will be the most difficult one, and we want to be sure that we present it in the appropriate manner.”

Some funeral-home directors, however, simply dismiss the concept of billing for their knowledge.

“It’s a terrible idea,” says Barbara Bromirski, 68, a fourth-generation funeral-home director at Bromirski Funeral Home in Jersey City. She says profits at the family-owned business “keeps pace with inflation.”

As part of her services, Bromirski has moved into other areas while helping families preplan a relative’s funeral. She may help place the relative in a nursing home or fill out Medicaid applications. But she refers some questions to others. “We can suggest names of accountants and lawyers and other professionals, and let them do the detailed work. Our job is to help our customers’ families in their time of need. We don’t have to try to make money off them for these small services,” she says.

Directors with Bromirski’s point of view may soon be in the minority, according to Horton, from Citrin Cooperman.

“Longtime funeral directors may be the most resistant to change,” he says. “Change may come slowly, but the new breed of funeral directors tend to be more sensitive about the way their business has changed. They know that to survive they have to modify their business model.”

E-mail to [email protected]