The 7 Core Elements: Building a Part C & D Compliance Program for Your Small Practice (42 CFR § 422.503(b))

Medicare Advantage (Part C) and Prescription Drug (Part D) plans are required under 42 CFR 422.503(b)(4)(vi) and the parallel Part D rules to have an effective compliance program that extends down to first-tier, downstream, and related entities, including small practices. When your clinic contracts with a Medicare Advantage organization or Part D plan, you are effectively part of that compliance program and are expected to align with its seven core elements.

For small practices, this is often misunderstood as “plan-level paperwork,” but CMS treats compliance as a shared operational responsibility. If your clinic cannot show written standards of conduct, FWA and general compliance training, reporting mechanisms, disciplinary standards, monitoring, and prompt corrective actions, you can trigger corrective action plans, contract sanctions, and even termination of plan participation.

This article explains the seven core elements under 42 CFR 422.503(b), shows what they mean in day-to-day clinic operations, and offers a practical survival guide to building a lean but credible compliance program. It also provides a self-audit checklist, realistic pitfalls, and governance ideas tailored to clinics with limited staff and budget.

Small practices often sign Medicare Advantage and Part D contracts to keep patient volume stable, but the compliance provisions in those contracts are rarely operationalized in the clinic. Under 42 CFR 422.503(b) and related Part D rules, the Medicare Advantage organization or Part D sponsor must ensure its downstream entities implement and follow an effective compliance program that mirrors the plan’s own seven core elements.

That means your clinic is expected to adopt written standards of conduct, designate a compliance officer, train staff, maintain reporting channels, enforce disciplinary standards, monitor risks, and correct problems promptly. These are not optional; they are conditions for the plan’s contract with CMS and, by extension, for your participation as a contracted provider.

If a CMS audit or plan program audit finds that your clinic is not meeting these expectations, the plan may impose remediation, withhold referrals, or terminate your agreement. This introduces direct revenue risk and reputational harm for the practice. Understanding the seven elements and mapping them to simple, documented processes is the most efficient way to reduce that risk.

Understanding Legal Framework & Scope Under 42 CFR 422.503(b)

The core rule is 42 CFR 422.503(b), which sets the conditions for an entity to contract as a Medicare Advantage organization. Subsection 422.503(b)(4)(vi) requires an effective compliance program that includes seven core requirements: written policies and standards of conduct; a compliance officer and committee; effective training and education; effective lines of communication; well-publicized disciplinary standards; an effective system for routine monitoring and auditing; and procedures for prompt response and corrective actions.

The Part D parallel is found in 42 CFR 423.504(b)(4)(vi), which imposes the same seven elements on Part D plan sponsors. CMS expects both Part C and D sponsors to flow these requirements down to their first tier, downstream, and related entities, including contracted providers, billing vendors, and management services organizations.

Although these sections are federal requirements for plans, CMS guidance makes clear that FDR entities must participate in the plan’s compliance program. That typically means:

• Adopting and distributing standards of conduct consistent with the plan’s values and compliance expectations.

• Providing FWA and general compliance training (either the plan’s training, CMS standardized modules, or equivalent content) to all relevant staff.

• Agreeing to audit, reporting expectations, and corrective actions.

States may layer additional requirements, such as licensing, record retention, or anti-kickback rules, but they cannot undercut the federal Part C and D compliance program elements. Clinics must ensure their policies reflect both sets of rules, especially where state law imposes stronger sanctions or patient-protection standards.

By understanding this framework, your clinic can reduce claim denials tied to noncompliance (for example, when plans suspect FWA), minimize the likelihood of network termination, and streamline responses to plan audits and CMS data calls.

CMS has direct oversight authority over Medicare Advantage and Part D plans under Part 422 and Part 423, including the power to impose intermediate sanctions, civil money penalties, and contract terminations when compliance programs are ineffective or not implemented. Plans, in turn, must oversee their FDR entities and take remedial action if clinics or other downstream entities fail to meet compliance expectations.

Common enforcement mechanisms include:

• CMS program audits that review the effectiveness of plan compliance programs and their oversight of FDRs, including reviewing sample provider files and training records.

• Targeted audits or focused reviews if CMS receives complaints, data outliers, or law enforcement referrals suggesting FWA or noncompliance.

• Plan-level corrective action plans that require the plan to verify that its FDRs, including your clinic, have implemented required elements.

• Contract actions where a plan terminates or suspends a provider for noncompliance with plan policies, including compliance-program requirements.

For a small clinic, enforcement often appears first as a request from a plan for training logs, standards of conduct, or FWA attestations. Failure to respond, incomplete documentation, or a pattern of missing elements may be treated as evidence that the clinic is a weak link in the plan’s compliance program, prompting closer plan oversight and, in serious cases, network removal.

Although this section references HIPAA in the heading, the controls are focused on aligning your clinic with 42 CFR 422.503(b)(4)(vi) through practical steps that also support HIPAA and general compliance expectations. Each control includes implementation guidance, evidence to retain, and a low-cost operationalization approach.

1. Implement written standards of conduct and basic compliance policies.

   Create a short standards-of-conduct document that covers integrity, billing accuracy, FWA, patient rights, non-retaliation, and reporting expectations. Align the language with your MA and Part D plans’ standards of conduct so that it clearly supports the plan’s compliance program as required by 42 CFR 422.503(b)(4)(vi)(A).

• Implementation: Have the practice owner or medical director approve the standards. Distribute them at hiring and annually, and collect staff attestations.

• Evidence: Dated policy, version history, signed staff acknowledgments, and proof of annual review.

• Low-cost approach: Maintain the policy as a simple word-processing document in a shared folder and use a one-page acknowledgment form.

2. Designate a compliance lead and simple committee function.

   The regulation requires a compliance officer and committee that report directly to senior management. In a small clinic, this can be a single compliance lead supported by a standing “compliance huddle” that meets quarterly and reports to the owner or lead physician, satisfying 42 CFR 422.503(b)(4)(vi)(B).

• Implementation: Issue a one-page charter naming the compliance lead, defining responsibilities, and setting a quarterly meeting schedule.

  Evidence: Meeting notes, agendas, summary emails to leadership, and documented follow-up actions.

• Low-cost approach: Add compliance as a recurring agenda item to existing staff or leadership meetings, rather than creating separate sessions.

3. Build a realistic annual training and orientation plan.

   CMS expects effective training and education for employees, leadership, and governing body members at least annually and at orientation, per 42 CFR 422.503(b)(4)(vi)(C).

• Implementation: Use plan-provided or CMS-equivalent training modules on general compliance and FWA, and add a short clinic-specific segment explaining how staff report concerns and where policies are stored.

• Evidence: Training roster with dates, topics, and attendee signatures or electronic completion records; copies of training materials.

• Low-cost approach: Deliver training during existing staff meetings and capture attendance with a sign-in sheet or simple e-learning platform.

4. Establish confidential reporting and non-retaliation channels.

   42 CFR 422.503(b)(4)(vi)(D) and (A)(7) require effective lines of communication and a non-retaliation policy.

• Implementation: Provide at least two ways to report concerns: direct to the compliance lead and via an anonymous drop box or dedicated email inbox. Post this information in staff areas and include it in onboarding.

• Evidence: Written communication policy, photos of posted notices, and log of reported issues with follow-up actions (de-identified as appropriate).

• Low-cost approach: Use a basic email account for reports and a locked suggestion box already located in the break room or front office.

5. Define and apply disciplinary standards for noncompliance.

   CMS expects “well-publicized disciplinary standards” to encourage good-faith participation and enforce consequences for noncompliance, as stated in 42 CFR 422.503(b)(4)(vi)(E).

• Implementation: Integrate compliance expectations into job descriptions and your HR handbook, including progressive discipline steps for intentional misconduct, repeated errors, and failure to report issues.

• Evidence: HR policy documents, acknowledgment forms, and documentation of disciplinary actions tied to compliance issues.

• Low-cost approach: Incorporate compliance into existing performance reviews and counseling forms rather than creating new systems.

6. Create a simple monitoring and auditing plan.

   An effective system for routine monitoring and identification of compliance risks is required under 42 CFR 422.503(b)(4)(vi)(F).

• Implementation: Define three to five mini-audits each year, such as reviewing a small sample of claims for coding accuracy, checking that FWA training is current, and confirming that required notices or attestations have been completed.

• Evidence: Written audit plan, checklists, sampling methods, findings summary, and documentation of corrective actions.

• Low-cost approach: Assign sampling and review tasks to existing staff, rotating responsibilities to avoid burnout.

7. Document prompt response and corrective action procedures.

   42 CFR 422.503(b)(4)(vi)(G) requires investigations and corrective actions when potential misconduct is identified, including repayment and self-reporting when appropriate.

• Implementation: Draft a short corrective action procedure describing how issues are triaged, investigated, documented, and resolved, and when the clinic will notify plans or regulators.

• Evidence: Issue logs, investigation notes, corrective action plans, repayment documentation, and communication with plans.

• Low-cost approach: Use a single standardized “incident and corrective action” form stored in your compliance folder.

Taken together, these controls ensure that your clinic reflects the seven core elements in a way that is realistic, documented, and aligned with the regulatory text.

Case Study

A small multi-specialty practice contracts with several Medicare Advantages and Part D plans. The practice signs all compliance addenda but treats them as “plan paperwork” and never translates them into internal processes. No written standards of conduct exist, FWA training is informal and undocumented, and there is no named compliance lead.

During a CMS program audit, one of the plans is selected for review. As part of the audit, CMS requests documentation showing how the plan oversees its FDRs. The plan includes the practice in its FDR sample and requests from the clinic: standards of conduct, FWA/compliance training logs, evidence of disciplinary standards, and recent monitoring results. The clinic cannot produce most of these documents.

CMS concludes that the plan’s oversight of FDRs is weak, and the plan receives a corrective action plan requiring stricter FDR contracting and monitoring. In response, the plan issues a notice to the practice: either implement an effective compliance program consistent with 42 CFR 422.503(b)(4)(vi) within 90 days or risk removal from the network.

The clinic reacts quickly. Leadership designates a compliance lead, drafts standards of conduct, and implements FWA and compliance training at a staff meeting. A simple reporting channel is created with a dedicated email address and posted instructions, and three mini-audits are scheduled for the year. Corrective action procedures are documented, with the first use being a self-identified billing error that is corrected and refunded.

At the plan’s follow-up review, the clinic is able to show a dated policy set, training rosters, evidence of monitoring, and a filled-out corrective action form. Although there is still room for improvement, the plan reports to CMS that FDR oversight for this provider has improved, avoiding more severe consequences for both the clinic and the plan.

This scenario illustrates how failing to operationalize the seven elements can escalate from a paperwork issue into real contract and revenue risk. It also shows that a small practice can recover by implementing lean but documented controls aligned with 42 CFR 422.503(b)(4)(vi).

Use this table as a quick internal review tool focused on 42 CFR 422.503(b)(4)(vi) and the corresponding Part D provisions. Each task is designed to create evidence that your clinic participates meaningfully in your plans’ compliance programs.

By completing these tasks on schedule and retaining the evidence, your clinic can demonstrate real alignment with the seven core elements and reduce the chance that a plan or CMS will view your practice as a compliance liability.

Common Audit Pitfalls to Avoid Under 42 CFR 422.503(b)

Many small practices stumble over the same predictable issues when plans or CMS look at their compliance posture. Focusing on these pitfalls can help you prioritize fixes.

• Treating plan compliance addenda as “boilerplate” and never implementing them, which undermines the effective compliance program required by 42 CFR 422.503(b)(4)(vi) and can lead to plans to classify the clinic as an unmanaged FDR risk.

• Failing to document FWA and general compliance training, even when informal discussions occur, leaving no proof that 42 CFR 422.503(b)(4)(vi)(C) expectations are met.

• Naming a compliance officer only on paper, without giving the person time, authority, or direct reporting access to leadership, which conflicts with the accountability expectations in 42 CFR 422.503(b)(4)(vi)(B).

• Lacking any confidential reporting mechanism or non-retaliation policy, which suggests that staff cannot safely raise issues and contradicts 42 CFR 422.503(b)(4)(vi)(D) and (A)(7).

• Ignoring monitoring and auditing, or conducting checks without documenting methodology and results, meaning the clinic cannot show compliance with 42 CFR 422.503(b)(4)(vi)(F) during an audit.

• Addressing known issues informally without documenting root-cause analysis, corrective actions, or repayments, making it hard to show adherence to the prompt response expectations in 42 CFR 422.503(b)(4)(vi)(G).

Avoiding these pitfalls by putting lightweight, but written controls in place greatly lowers the risk that your clinic will be flagged during FDR oversight reviews or CMS program audits and helps preserve critical plan relationships.

A written program alone does not satisfy 42 CFR 422.503(b); CMS also expects that your organization’s governing body understands and oversees the compliance program. For a small practice, the “governing body” may be the practice owner, managing partner, or board, but they must receive regular updates and demonstrate oversight of compliance activities.

A practical governance approach includes:

• Adding a compliance update to quarterly leadership meetings, including summary of training, audits, and open issues.

• Requiring the compliance lead to submit a short annual report that references the seven core elements and major risk areas.

• Ensuring that hiring, performance evaluation, and vendor management processes all reflect compliance expectations, especially for roles that influence Medicare billing or prescribing.

By embedding compliance into leadership agendas and basic HR processes, your clinic shows that compliance is not a side project but part of how the practice is managed, which is exactly what the regulations expect from effective programs.

An effective Part C and D compliance program is not optional for small practices that participate in Medicare Advantage or Part D networks. Under 42 CFR 422.503(b)(4)(vi) and the related Part D provisions, plans must demonstrate that their FDRs, including your clinic, are part of a functioning compliance program with seven core elements. Aligning your policies, training, reporting, discipline, monitoring, and corrective actions with these elements protects both your contracts and your patients.

Over the next 30 to 90 days, a small clinic can take the following concrete steps:

1. Approve or update written standards of conduct and distribute them to all staff with signed acknowledgments.

2. Formally designate a compliance lead, define their authority, and schedule quarterly compliance huddles that report to the practice owner or governing body.

3. Implement or update annual FWA and general compliance training for all staff and leadership, and create a simple system to track completion.

4. Establish at least two confidential reporting channels and a written non-retaliation statement, and communicate them during orientation and staff meetings.

5. Launch a minimal annual monitoring plan with a handful of documented audits and a basic corrective action procedure for issues that arise.

Recommended compliance tool: 

A single “Compliance Program Playbook” document that summarizes your seven core elements, references underlying policies, and lists where evidence (logs, reports, attestations) is stored.

Advice: 

Block one afternoon with your practice owner and compliance lead to map each of the seven elements to a specific policy, process, and piece of evidence in your clinic, and then close any gaps immediately.

• 42 CFR 422.503 – General provisions (Medicare Advantage compliance program requirements and seven core elements)
  

• 42 CFR 423.504 – General provisions (Part D sponsor compliance program requirements and FDR oversight)
  

• CMS Medicare Managed Care Manual – Chapters 9, 21: Compliance Program Guidelines

• OIG Compliance Program Guidance for Individual and Small Group Physician Practices