When the 2026 Program Audit update landed, I didn’t read it as a checklist of changes. I’ve worked in healthcare compliance long enough to recognize the difference between a routine regulatory update and a directional shift.
The CMS 2026 Program Audit update is not just another regulatory communication. It signals a deeper shift in how compliance, data, and operational control will be evaluated inside health plans. Because this isn’t just about audits. It’s about how CMS now defines real compliance.
And if you’re a compliance, audit, or operations leader at a Medicare Advantage or Part D plan, the way you interpret this update will shape how prepared your organization really is for the next few years.
I want to break this down not as a summary, but as a compliance leader who understands what this means once the memo leaves your inbox and hits your operations.
1. Scoring is gone. And that’s actually more pressure, not less.
“CMS will remove scoring from audits, and conditions will no longer have a point value associated with them regardless of classification…”
At first glance, that can feel like pressure coming off. In reality, it does the opposite.
Scoring gave many organizations a dangerous comfort blanket. Scoring created a false safety net. You could benchmark. You could explain risk away with averages and percentiles. You could focus on improving numbers instead of strengthening controls.
Now that safety net is gone.
What replaces it is much more direct: Can you demonstrate that your controls actually work? The CMS 2026 Program Audit update shifts the conversation from “How did we score?” to “Did our system hold up?”
And that, to me, is a much harder question to answer defensibly.
The removal of scoring under the CMS 2026 Program Audit update is not about making audits easier. It is about moving the focus from numeric optics to control behavior and operational accountability.
2. Audit reports must become narrative and qualitative
When scoring and point values go away, numeric summaries lose relevance. A table of scores and severities no longer tells the story CMS now wants. What matters instead is the qualitative narrative behind each finding.
With CAR, Observation, and IDS now taking center stage, CMS is no longer looking for mathematical justification. They’re looking for behavioral and operational understanding.
In practical terms, this means your audit report should no longer just answer: What failed?
It must now explain: Why it failed. What it reveals about your control environment. And how that failure connects to member impact and recurrence risk.
This changes how audit and compliance teams need to write, not just what they measure. Because in a world without scoring, the only way to demonstrate compliance maturity is through clarity of analysis.
3. ICAR and ORCA are gone. CAR and IDS now define your risk.
The removal of ICAR and ORCA and the move to CAR, Observation, and IDS is not cosmetic. This changes how findings are interpreted and managed inside your organization.
“CMS is removing the classifications of Immediate Corrective Action Required (ICAR) and Observation Requiring Corrective Action (ORCA)… conditions will be classified as a Corrective Action Required (CAR) or Observation… CMS will continue applying the Invalid Data Submission (IDS) classification…”
Here’s what this means in practice:
- CAR is no longer just an urgency tag. It is a signal about the strength of your internal controls and your ability to prevent recurrence.
- IDS is not a data problem anymore. It’s a credibility problem.
“An IDS is a finding that is cited when a Sponsor has failed to produce an accurate or complete universe and CMS cannot determine compliance…”
If CMS cannot verify your universes, they cannot verify your compliance. Period.
That elevates universe management and data governance into core compliance territory. Not an IT function. Not a reporting back-office job. A compliance responsibility.
4. Compliance Program Effectiveness (CPE) just moved into the spotlight
The most underestimated aspect of the 2026 Program Audit update is how CPE will be evaluated.
CMS is changing how it evaluates Compliance Program Effectiveness (CPE).
It is no longer a standalone structural review. It will now be reviewed inside other audited program areas, during live fieldwork.
“While reviewing other program areas of the audit, CMS will have in-depth discussions with the Sponsor about how it prevents, detects, and corrects noncompliance…”
“Findings specific to the compliance program structure will generally not be cited.”
This is a transcendental shift.
CMS is less concerned about how polished your compliance program looks on paper.
They care how it behaves inside your day-to-day operations.
That means if your compliance team still operates as:
- A policy review office
- A post-incident documentation function
- A quarterly reporting hub
…it’s time to evolve.
Compliance can no longer be the back-office gatekeeper. Successful payers need to support compliance as an operational partner, embedded in day-to-day processes to prevent issues before they occur. The question is no longer about “Do you have an oversight process?”, it’s “What did your program find before we did?”
5. Independent validation just got more nuanced… and more telling
CMS is also refining how correction and validation will work.
Some CARs will be validated through simpler methods like documentation review or webinars.
Others, the more complex ones, will still require full validation audits.
And here’s the critical threshold:
“… If a Sponsor has more than five conditions that need a validation audit, CMS will require the Sponsor to hire an independent auditor.”
The message here is subtle but important, and it tells me two things:
First, CMS is becoming more selective, but also more targeted. It’s now using validation type as a proxy for risk severity. This means your organization must be much better at distinguishing between surface-level issues and systemic ones.
Second, plans now need much sharper internal visibility into the complexity level of their findings. And your internal tracking of CAR complexity will start to matter as much as the CAR itself. Because crossing that threshold isn’t just operational, it’s financial, reputational, and strategic.
6. Invalid Data Submission (IDS) is no longer “a data problem.”
I want to be very clear on this: IDS is not an IT issue. It’s a governance failure. CMS defines an IDS when:
“A Sponsor has failed to produce an accurate or complete universe and CMS cannot determine compliance…”
If your universes cannot stand scrutiny, CMS won’t assess the rest of your controls.
This means: Data governance belongs inside your compliance strategy.
- Your compliance leaders must have visibility into universe generation.
- And your audit readiness starts with data integrity far before fieldwork.
7. Member impact is now the compliance lens
One of the most important lines in the 2026 Program Audit update is also one of the most human:
“CMS expects Sponsors to prioritize correcting findings that may impact access to services or result in adverse outcomes…”
This is CMS making it clear: Compliance is not just procedural. It is patient-centered.
Findings are no longer abstract regulatory events. They are tied to member access, service delays, and care outcomes. And, compliance is not just about meeting regulations. It’s about protecting access to care. And CMS is aligning audits accordingly.
So, when your internal teams talk about closing CARs, the question shouldn’t just be, “Did we fix the process?” It should be, “Did this improve access or prevent harm?”
What I would focus on as a compliance leader right now
The CMS 2026 Program Audit update raises the bar. CMS doesn’t want reactive readiness anymore.
It demands structural readiness. It’s no longer a question of “Are you audit ready?” – it’s “Are you structurally ready to prevent findings?”
If I were briefing an executive team off this 2026 Program Audit update, here’s where I’d place attention:
- Embed compliance into operations.
Not as an oversight layer, but as a live partner within business workflows. - Strengthen universe and data governance immediately.
IDS risk is now existential to your audit posture. - Shift from corrective action tracking to recurrence prevention.
CMS is much more interested in what won’t happen again than what you fixed once. - Re-evaluate your CPE using live scenarios, not policy documents.
Can your compliance program demonstrate how it prevents and detects, not just respond? - Invest in connected audit and monitoring infrastructure.
Disconnected tools and spreadsheets were fragile before. Under this model, they are exposed.
What this shift means for healthcare payer compliance leaders
What I find interesting, and encouraging, is that some payer organizations have already started moving in this direction over the past few years. Moving away from disconnected tools, manual tracking, and paper-heavy compliance processes toward more connected, data-driven, operationally embedded models.
At Inovaare, what stands out to me is not the technology itself, but the inherent belief that compliance should never survive as a layer outside operations. The product decisions we make, reflect this same shift CMS is now formalizing.
Not because of regulation. But because operational reality demanded it first.
CMS is just catching up with what resilient organizations already figured out: Compliance must live inside the system, not sit on top of it.
The CMS 2026 Program Audit update is not just an audit methodology change. It is CMS redefining how it views compliance maturity in health plans.
Health plans that treat this as a deep structural shift, and not just another regulatory memo, will be the ones still standing strong when 2026 audits begin to feel very different from everything we’ve experienced before.
Brenda Wade,
Chief Compliance Officer