(a) If the district requires a mandatory payment authorized under this chapter, the district shall create a local provider participation fund.
(b) The local provider participation fund consists of:
(1) all revenue received by the district attributable to mandatory payments authorized under this chapter;
(2) money received from the Health and Human Services Commission as a refund of an intergovernmental transfer under the program, 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 of the district may be used only to:
(1) fund intergovernmental transfers from the district to the state to provide the nonfederal share of Medicaid payments for:
(A) payments to nonpublic hospitals, if those payments are authorized under the Texas Healthcare Transformation and Quality Improvement Program waiver issued under Section 1115 of the federal Social Security Act (42 U.S.C. § 1315);
(B) uniform rate enhancements for nonpublic hospitals in the Medicaid managed care service area in which the district is located;
(C) payments available under another federal waiver program authorizing Medicaid payments to nonpublic hospitals;
(D) any payments to Medicaid managed care organizations for the benefit of nonpublic hospitals and for which federal matching funds are available; or
(E) any reimbursement to nonpublic hospitals for which federal matching funds are available;
(2) subject to Section 298F.151(d), pay the administrative expenses of the district in administering the program, including collateralization of deposits;
(3) refund a mandatory payment collected in error from a paying provider;
(4) refund to paying providers a proportionate share of the money that the district:
(A) receives from the Health and Human Services Commission that is not used to fund the nonfederal share of Medicaid supplemental payment program payments; or
(B) determines cannot be used to fund the nonfederal share of Medicaid supplemental payment program payments; and
(5) transfer funds to the Health and Human Services Commission if the district is legally required to transfer the funds to address a disallowance of federal matching funds with respect to programs for which the district made intergovernmental transfers described by Subdivision (1).
(d) Money in the local provider participation fund may not be commingled with other district funds.
(e) Notwithstanding any other provision of this chapter, with respect to an intergovernmental transfer of funds described by Subsection (c)(1) made by the district, any funds received by the state, district, or other entity as a result of that transfer may not be used by the state, district, or any other entity to:
(1) 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); or
(2) fund the nonfederal share of payments to nonpublic hospitals available through the Medicaid disproportionate share hospital program.