Title: Advantage Home Health Care, Inc. v. Indiana State Dept. of Health
Citation: N/A
Docket Number: 18S02-0405-CV-198
State: Indiana
Issuer: Indiana Supreme Court
Date: June 22, 2005

ATTORNEYS FOR APPELLANT 
 
 
 
 
ATTORNEYS FOR APPELLEES 
Virginia Wright Caudill 
Steve Carter 
Robert W. Markette, Jr. 
Attorney General of Indiana 
Indianapolis, Indiana 
 
 
David L. Steiner 
 
Laureanne Nordstrom 
 
Deputies Attorney General 
 
Indianapolis, Indiana 
 
 
ATTORNEYS FOR AMICUS CURIAE 
 
Peter D. Keisler 
 
Assistant Attorney General of the  
 
United States 
 
 
 
 
Susan W. Brooks 
 
United States Attorney 
 
 
James P. Hanlon 
 
Assistant United States Attorney 
 
 
Michael S. Raab 
 
Mark S. Davies 
 
Attorneys, Appellate Staff, Department  
 
of Justice 
 
 
 
 
In the 
Indiana Supreme Court  
_________________________________ 
 
No. 18S02-0405-CV-198 
 
ADVANTAGE HOME HEALTH CARE, INC., 
 
 
 
 
 
 
 
 
Appellant (Plaintiff below), 
 
v. 
 
INDIANA STATE DEPARTMENT OF HEALTH 
AND INDIANA STATE HEALTH COMMISSIONER, 
 
 
 
 
 
 
 
 
Appellees (Defendants below). 
_________________________________ 
 
Appeal from the Delaware Circuit Court, No. 18C01-0109-CP-547  
The Honorable Marianne Vorhees, Master Commissioner 
The Honorable Wayne Lennington, Judge 
_________________________________ 
 
On Petition to Transfer from the Indiana Court of Appeals, No. 18A02-0211-CV-928.  
_________________________________ 
 
June 22, 2005 
 
Shepard, Chief Justice. 
 
 
Dissatisfied with reports about inspections the Indiana Department of Health conducted 
of its facilities, appellant Advantage Home Health Care filed for declaratory judgment.  It sought 
to establish that the inspection reports and accompanying requests for correction of deficiencies 
constituted orders appealable under the Administrative Orders and Procedures Act.  Because 
Advantage did not exhaust the administrative procedures available to it, the trial court properly 
granted judgment to the Department. 
 
 
Facts and Procedural History 
 
 
 
Advantage Home Health Care, Inc., is a home health agency that provides patients with 
both skilled and unskilled in-home health care services.  The Indiana State Department of Health 
licenses Advantage and other providers, assuring compliance with various state statutes and 
regulations concerning the operation of home health agencies.  Advantage is also a certified 
provider under the federal Medicare and Medicaid programs and must comply with federal 
statues and regulations as well as with certain standards known as “conditions of participation” 
in order to receive federal funds. 
 
To maintain its state license and federal certification, Advantage is subject to inspections 
commonly referred to as “surveys.”  The Department conducts these surveys on a routine annual 
basis, or if a complaint is received concerning the home health agency.  Even though only a 
single inspection usually occurs, the Department acts in two distinct capacities when it conducts 
surveys: 1) as a state licensing and regulatory agency; and 2) as an agent of the federal Centers of 
Medicare and Medicaid Services.  
 
 
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Once the inspection is complete, the investigator produces two survey reports, one report 
addressing compliance with state law and the other compliance with federal law.  The two 
reports each set forth various “findings” that are essentially statements made by the investigator 
as a result of her inspection.  The “findings” are based on information collected during the 
inspection from interviews, the review of records, and observations of the treatment provided by 
the agency. 
 
Completed reports are recorded on a standard form called a “Statement of Deficiencies 
and Plan of Correction,” with one form referring to state law and one to federal law.  These are 
sent from the field to the Department’s main office.  The Department then forwards the 
statements of deficiency to the home health agency.  It also sends an accompanying letter that 
summarizes the survey results, and requests that the agency submit a “plan of correction” to 
detail how it will address the identified violations.  The letter also informs the home health 
agency of the opportunity to contest the deficiencies listed by invoking an Internal Dispute 
Resolution (“IDR”) process.  
 
At the time the facts relevant to this case arose, the Department’s IDR process afforded 
an agency both a paper review and a “face-to-face” review of the statement of deficiencies. 
(Appellant’s App. at 750.)  In the paper review, the IDR panel reviews the statement of 
deficiencies and any documentation provided by the agency and can remove, modify or leave 
unchanged any of the deficiencies identified.  If the agency is dissatisfied with the results of the 
paper review, it can request a face-to-face review in which the agency can speak directly with the 
IDR panel. 
 
 In April 2001, the Department completed both state and federal surveys of Advantage 
after receiving a complaint that a nurse employed by Advantage struck a special needs child in 
the mouth.  The surveys identified three violations of Indiana’s home health rules and about 
twenty-six violations of federal regulations.  On May 23, 2001, the Department sent a letter, and 
federal and state statements of deficiency to Advantage.  The letter, like the first page of the 
federal statement of deficiency, indicated that Advantage was out of compliance with two federal 
conditions of participation and informed Advantage that “in order to interrupt this determination 
 
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of noncompliance process a Credible Allegation of Compliance must be submitted to this office 
for each condition cited and a plan of correction for each standard level deficiency cited.” 
(Appellant’s App. at 502.)  The letter briefly mentioned the existence of state deficiencies.1  It 
also informed Advantage of its ability to “contest deficiencies contained in the Statement of 
Deficiencies” through the IDR process.  (Appellant’s App. at 503.)   
 
Advantage filed a plan of correction and on June 4, 2001, it requested administrative 
review of the surveys under the Administrative Orders and Procedures Act (“AOPA”), Ind. Code 
Ann. §§ 4-21.5-1-1 to -7-9 (West 2002).  On June 8, 2001, the Department responded by letter, 
informing Advantage that surveys did not constitute orders and were not subject to review under 
AOPA.  It told Advantage of its opportunity to challenge that decision through administrative 
review, though Advantage never sought review of the June 8 decision. (Appellees’ Br. at 11-12.)   
 
Instead of seeking administrative review of the Department’s decision that surveys did 
not constitute orders, Advantage requested a paper IDR for both survey reports on August 23, 
2001.    Following that review, the Department issued revised state and federal surveys on 
October 23, 2001.  On October 26, 2001, Advantage requested a face-to-face IDR of the federal 
survey, and in response to that request, a further revised federal survey was issued on January 17, 
2002. (Appellant’s App. at 750.)   
 
On September 25, 2001, Advantage filed a complaint for declaratory judgment seeking to 
reverse the Department’s position that a survey was not an order subject to review under AOPA.  
The trial court granted summary judgment in favor of the Department, concluding that the 
surveys were exempted from AOPA pursuant to Ind. Code § 4-21.5-2-5(9), (10).  It also held that 
surveys did not meet AOPA’s definition of “order” because they simply documented the findings 
of investigations. 
 
Advantage appealed.  The Court of Appeals reversed, holding that the statement of 
deficiencies constituted an order obliging Advantage to file a plan of correction “within a certain 
                                             
 
1 The letter’s reference to the state deficiencies is a passing mention in a single sentence:  “The survey report reveals 
that, in addition to state deficiencies, there are federal deficiencies that are preventing your facility from being in 
compliance with the requirements [established for Medicare/Medicaid certification].” (Appellant’s App. at 502.)   
 
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period of time and in a certain required manner.”  Advantage Home Health Care, Inc. v. Indiana 
State Dept. of Health, 792 N.E.2d 914, 917 (Ind. Ct. App. 2003) vacated.  It also held that the 
statement of deficiencies did not fall under the list of exempt agency actions. Id. at 918.  We 
granted transfer.  
 
 
I. The Federal Survey 
 
 
The primary issue joined by the parties is whether the state and federal surveys are 
subject to review under AOPA.  (Appellant’s Br. at 11-22; Appellees’ Br. at 15-19.)  Advantage, 
in the alternative, argues that even if AOPA does not apply to the statements of deficiency, their 
due process rights entitle them to an independent review of the statements.  The Department also 
urges that it was entitled to judgment because Advantage did not pursue its administrative 
remedies.  
 
 
We begin by addressing the status of the federal surveys.  Appearing as Amicus Curiae, 
the United States has expressed grave concern that the opinion of the Court of Appeals could be 
read as subjecting the survey reports conducted by the Department on behalf of the federal 
government to state administrative review.  Of course, the Court of Appeals opinion was vacated 
at the time we granted transfer.  See Ind. Appellate Rule 58(A). 
 
 
At oral argument before this Court, however, Advantage declared that it does not seek 
review of the federal survey under AOPA, but seeks review of the survey produced by the 
Department acting in its role as the state licensing agency.2  In light of that indication, we need 
only consider the application of AOPA to the survey conducted by the Department as a state 
licensing board.  
 
                                             
 
2 The oral argument for this case, and all other oral arguments before this Court since 2001, may be found at 
http://www.indianacourts.org/apps/webcasts.  Oral arguments before the Court are broadcast live over the internet, 
and are also stored in a searchable online archive.  
 
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II. Exhaustion of Administrative Remedies 
 
 
The Department sought judgment in the trial court on grounds that Advantage failed to 
exhaust its administrative remedies prior to seeking relief from the courts. (Appellant’s App. at 
186-187.) 
 
 
The basis of the Department’s argument is that the letter sent on June 8, 2001, informing 
Advantage that its request for an administrative hearing was denied because surveys did not 
constitute orders under AOPA, was itself an order and therefore subject to the review procedures 
outlined in Ind. Code Ann. § 4-21.5-3-7 (West 2002). (Appellees’ Br. at 11-14.)  It contends that 
Advantage’s failure to invoke these processes should bar Advantage from seeking relief in the 
courts.   
 
 
It has long been Indiana law that a claimant with an available administrative remedy must 
pursue that remedy before being allowed access to the judicial power. City of East Chicago v. 
Sinclair Refining Co., 232 Ind. 295, 306, 111 N.E.2d 459, 464 (1953).  Quite beside this general 
jurisprudential rule of administrative law, the legislature has codified this principle. See Ind. 
Code Ann. § 4-21.5-5-4 (West 2002).   
 
 
We have on several occasions articulated the reasoning behind this policy of requiring 
exhaustion of administrative remedies before review by courts is permitted.  As we noted in 
Turner v. City of Evansville: 
 
Premature litigation may be avoided, an adequate record for judicial review may 
be compiled, and agencies retain the opportunity and autonomy to correct their 
own errors. Even if the ground of complaint is the unconstitutionality of the 
statute, which may be beyond the agency’s power to resolve, exhaustion may still 
be required because ‘administrative action may resolve the case on other grounds 
without confronting broader legal issues.’ 
 
740 N.E.2d 860, 862 (Ind. 2001) (quoting State Bd. of Tax Comm’rs v. Montgomery, 730 
N.E.2d 680, 684 (Ind. 2000)).  Justice Sullivan noted several additional benefits of this approach: 
 
 
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The exhaustion requirement serves to avoid collateral, dilatory action of the likes 
of the instant action and to ensure the efficient, uninterrupted progression of 
administrative proceedings and the effective application of judicial review. It 
provides an agency with the opportunity ‘to correct its own errors, to afford the 
parties and the courts the benefit of [the agency’s] experience and expertise, and 
to compile a [factual] record which is adequate for review.’ 
 
Austin Lakes Joint Venture v. Avon Util., Inc., 648 N.E.2d 641, 644 (Ind. 1995) (quoting 
Uniroyal, Inc. v. Marshal, 579 F.2d 1060, 1064 (7th Cir. 1978)) (alteration in original).3  Where 
such an administrative remedy is readily available, filing a declaratory judgment action is not a 
suitable alternative.  See Turner, 740 N.E.2d at 862.   
 
The essence of Advantage’s claim is that the Department made a “mistake” in 
determining that the survey it issued did not constitute an order under AOPA.  As noted above, 
one of the primary reasons to require exhaustion of remedies is to provide the agency an 
opportunity to correct its own mistakes without wasting resources in a protracted series of 
collateral court proceedings.    
 
That is exactly what has occurred here.  Advantage had every opportunity to pursue 
administrative review of the June 8th determination, but it instead chose to seek judicial action on 
exactly the same question rather than permitting more senior officials in the Department to 
correct the mistake. 
 
 
That is assuming the Department’s determination of June 8th is mistaken at all.   The term 
“order,” in the context of administrative law, carries with it a sense of formality and finality.  In 
essence, the term order “implies a formal agency mandate issued at the culmination of some 
regular agency proceeding, and it includes any rule, regulation, direction, requirement, standard, 
determination or decision of the agency . . . .” 73A C.J.S. Public Administrative Law and 
Procedure § 279 (2004).  
 
 
                                             
 
3 Many of these considerations inform our view that “the exhaustion requirement . . . should not be dispensed with 
lightly on grounds of ‘futility.’”  M-Plan, Inc. v. Indiana Comprehensive Health Ins. Ass’n, 809 N.E.2d 834, 839 
(Ind. 2004) (quoting Town Council of New Harmony v. Parker, 726 N.E.2d 1217, 1224 (Ind. 2000)) (internal 
citations omitted).   
 
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In this case, statements of deficiencies represent something rather different from this 
concept of “order.”  The Department’s statement of deficiency represents little more than the 
initial summation of its investigation.  The statements certainly do reach some conclusions in the 
sense that they represent the end product of the investigation, but they produce nothing that 
approaches a “formal agency mandate.”   
 
The statement of deficiency in this instance reported findings that the Department might 
use as part of a separate and distinct agency action should it pursue sanctions against Advantage 
for non-compliance.  This, of course, is the very function of an administrative investigation.  An 
investigation is “an informal proceeding to obtain information to govern future action, and is not 
a proceeding in which action is taken against anyone.” 73 C.J.S. Public Administrative Law and 
Procedure § 145 (2004).  Moreover, the “purpose of an administrative investigation is to discover 
and procure evidence, and not to prove a pending charge or complaint, and thus, its function is 
distinct from an adjudication.” Id.  This is precisely what the statements of deficiencies issued by 
the Department actually do.  They do not seek to adjudicate compliance or non-compliance, but 
rather serve as a starting point from which the Department may judge the compliance of 
Advantage, or any home health agency, and determine if sanctions are appropriate. 
 
Advantage insists that because the statement of deficiency requires the submission of a 
plan of correction, it fits within AOPA’s definition of order as “1) an administrative agency 
action of; 2) particular applicability; 3) that establishes definitely; 4) the duty to submit a plan of 
correction.” (Appellant’s Br. at 14) (echoing Ind. Code Ann. § 4-21.5-1-9 (West 2002)).  
However, the “duty” to submit a plan of correction is, at best, modest.  The scope of the duty to 
file a plan of correction, as conceded by Advantage at oral argument, requires nothing more than 
the filing of a statement asserting that the home health agency believes itself to be in compliance 
with the applicable state laws and regulations.  To embrace the notion that our legislature 
intended routine judicial oversight of minimal agency requirements, one would have to imagine 
that it desires more muscular judicial activity than seems likely. 
 
The D.C. Circuit, perhaps the nation’s leading situs of administrative law disputes, has 
concluded that similar agency action is not subject to judicial review under the federal 
 
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Administrative Procedures Act.  In Reliable Automatic Sprinkler Co. v. Consumer Prod. Safety 
Comm’, it held that the Consumer Product Safety Commission (“CPSC”) did not take a final 
agency action, defined as an action which “imposes an obligation, denies a right, or fixes some 
legal relationship,”4 when it informed Reliable of its intent to make a preliminary determination 
that sprinkler heads manufactured by Reliable constituted a “substantial product hazard.” 324 
F.3d 726, 729, 731 (D.C. Cir. 2003).  The court reached this conclusion because the CPSC’s 
actions “amount[ed] to an investigation of appellant’s sprinkler heads, a statement of the 
agency’s intention to make a preliminary determination . . . and a request for voluntary corrective 
action.” Id. at 731. 
 
Although certainly not identical to the circumstances at bar, the facts in Reliable are 
sufficiently analogous to make the D.C. Circuit’s reasoning helpful.  Like Reliable, Advantage 
was the subject of an investigation and received a summary of that report.  Similarly, the survey 
report was “preliminary” in the sense that the IDR process was available to Advantage and in the 
sense that the results of the report would still be subject to challenge if the Department ever uses 
the survey report as the basis for imposing sanctions against Advantage.  While the request for a 
plan of correction certainly requires response, the system supplies so much leeway in fashioning 
an appropriate reply that it can barely be compared to a directive that might say, “Do this or we 
will fine you ‘X’.”  
  
 
Moreover, if such a minimal response would be enough to require review it would 
subject agencies to judicial oversight of relatively simple communications.  While the legislature 
may have intended AOPA as a check on the potential abuses of administrative agencies, the 
intent could not have been to so hamper the agencies in carrying out their responsibilities that 
AOPA becomes a shield for regulated entities to commit their own abuses.   
 
III. Conclusion 
 
                                             
 
4 Compare with AOPA’s definition of “order” found at Ind. Code Ann. § 4-21.5-1-9 (West 2002), which provides 
that “‘Order’ means an agency action of particular applicability that determines the legal rights, duties, privileges, 
immunities, or other legal interests of one (1) or more specific persons.” 
Although not identical, the federal definition of “final agency action” and AOPA’s definition of “order” each  
indicate not only a sense of finality, but also an imposition of some meaningful duty on the affected party.  
 
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Because Advantage failed to exhaust available administrative remedies by not seeking 
administrative review of the Department’s June 8th letter, the trial court correctly granted 
judgment to the Department.  We affirm. 
 
 
Dickson, Sullivan, Boehm, Rucker, JJ., concur. 
 
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