(a) Each district shall create a local provider participation fund.
(b) The local provider participation fund consists of:
(1) all revenue from the mandatory payment required by this chapter, including any penalties and interest attributable to delinquent payments;
(2) money received from the Health and Human Services Commission as a refund of an intergovernmental transfer from the district to the state for the purpose of providing the nonfederal share of Medicaid supplemental payment program payments, provided that the intergovernmental transfer does not receive a federal matching payment; and
(3) the earnings of the fund.

(c) Money deposited to the local provider participation fund may be used only to:
(1) fund intergovernmental transfers from the district to the state to provide:
(A) the nonfederal share of a Medicaid supplemental payment program authorized under the state Medicaid plan, the Texas Healthcare Transformation and Quality Improvement Program waiver issued under Section 1115 of the federal Social Security Act (42 U.S.C. § 1315), or a successor waiver program authorizing similar Medicaid supplemental payment programs; or
(B) payments to Medicaid managed care organizations that are dedicated for payment to hospitals;
(2) subsidize indigent programs;
(3) pay the administrative expenses of the district;
(4) refund a portion of a mandatory payment collected in error from a paying hospital;
(5) refund to paying hospitals the proportionate share of the money received by the district from the Health and Human Services Commission that is not used to fund the nonfederal share of Medicaid supplemental payment program payments; and
(6) refund to paying hospitals the proportionate share of money that the district determines cannot be used to fund the nonfederal share of Medicaid supplemental payment program payments.
(d) Money in the local provider participation fund may not be commingled with other county funds.
(e) An intergovernmental transfer of funds described by Subsection (c)(1) and any funds received by the district as a result of an intergovernmental transfer described by that subdivision may not be used by the district, the county in which the district is located, or any other entity to expand Medicaid eligibility under the Patient Protection and Affordable Care Act (Pub. L. No. 111-148) as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. No. 111-152).