Lots of Work for GCs Before and After SCOTUS Health Care Ruling

Julie McMahon

Corporate Counsel

06-29-2012

The U.S. Supreme Court’s ruling on Thursday morning to uphold most of the Obama administration’s health care law lets general counsel across the country—those working at health care companies and beyond—exhale a sigh of relief. But then it’s time to dive right back into a whole new set of questions.

“The industry will take a collective breath when the decision comes out, and then we’ll all be wondering what will happen next: what will be up in Congress, how the President will react, if the states will address the loose ends,” said Julie Barnes, director of health policy at the Bipartisan Policy Center and former counsel in Crowell & Moring’s health care practice group. “I don’t think health care lawyers can ever truly be at rest,” she added. “That’s just the nature of the beast.”

And with the frequent fluctuations in U.S. politics, policy, and regulation, that goes for corporate attorneys across the board. “It’s a good time to be a lawyer,” said Robert Kirtley, managing director at the advisory firm Duff & Phelps. Kirtley heads up Duff & Phelps’s management consulting and business solutions groups, and has worked in management consulting for more than 18 years. This latest Supreme Court ruling, he said, is one of the most monumental decisions that he’s seen for in-house counsel at businesses across the country.

Kirtley compared the health care decision’s reach with last year’s SCOTUS ruling in the Dukes v. Wal-Mart class action case: general counsel have to quickly adjust to the potentially huge impact on current and future legal issues for their businesses. And as with the Wal-Mart case, in-house counsel face pressure to predict and prepare for—and then respond to—the outcome.

Major changes in regulation and Supreme Court rulings give general counsel more of a role as a business advisor, in addition to providing legal counsel. “The general counsel can take the opportunity—based on how the Supreme Court or other federal courts rule—to lay out a path to reduce exposure or risk,” Kirtley said.

Today, the health care ruling should have companies in every industry turning to their general counsel for business advice, Kirtley said. “It’s not just health insurance or medical devices companies—every major company has health care benefits for its employees. It will radically transform how a huge part of the economy is going to be run. It’s not often that the GCs get calls from board members. Right now they’re getting calls from all kinds of people they aren’t used to hearing from.”

Because the health care case has attracted so much hype, general counsel are under a lot of pressure to “handicap,” or hedge their bets on one particular outcome, Kirtley said.

General counsel at companies directly affected by the ruling—those at hospitals, pharmaceutical companies, device manufacturers, and insurance providers, for example—are particularly pressed. “I would say there is tremendous pressure on them,” Kirtley said. “But they have to be prepared for any contingency. They need to make sure they are communicating with their legal department, sales, marketing, to make sure they know what they can and can’t sell—and can and can’t say.”

In any major ruling or imminent regulatory change, there are some steps a general counsel should always take, according to Rees Morrison, of Rees Morrison Associates in Princeton. A good GC prepares for the decision far in advance by providing clear information to areas within a company that will be affected, and keeps management in the loop for best- and worst-case scenarios, according to Morrison. “With big stuff, the in-house counsel should have explained what was going on previously to important clients,” he said. “The explanation should precede the decision.”

Lastly, in-house counsel have to be ready to take action when decision time comes. “It’s all common sense—it’s not magic,” Morrison said. He noted that counsel should produce “an educational notice or function ahead of time, a risk assessment, enveloping what we’re facing, and then what action to take and what operational changes are going to be made,” he said.

When dealing with the ruling on health care, the ability to understand and clearly communicate what will be affected in-house should be “the norm” for GCs, according to the Bipartisan Policy Center’s Barnes. “The health care industry never stops—especially right now. It’s a really tumultuous time,” she said. Barnes worked as a staffer on Capitol Hill during the rise and fall of the Clinton administration’s health care reform plan in the 1990s. Since then, she’s worked as an attorney in the health care industry, including at insurance providers. “Health care is not static,” she said. “It’s incredibly regulated. It’s always evolving. It’s a constant struggle.”

For GCs who are following trends within their company’s industry, federal legislation and Supreme Court decisions are often dramatic swings in an already volatile field. “This is an ongoing set of conversations in the legal, business, and health fields,” Barnes said. “That the Supreme Court had jurisdiction makes it a more uncertain and more unstable time, a time in which you don’t know whether to engage in a contract or take on that grant.” That can be particularly difficult for GCs, she said. “You wonder whether you’re participating in something that won’t be there the next day.”