Local Provider Participation Funds

Medicaid is a program jointly funded by federal and state governments. The federal government pays states for a specific percentage of Medicaid expenditures, called the Federal Medical Assistance Percentage (FMAP). To receive federal funding, states must ensure they can fund the remaining amount of Medicaid expenditures. To do this, states may use either state or local government funds as the non-federal share of Medicaid funding.

Beginning in 2013 local governments received approval from the Texas Legislature to operate Local Provider Participation Funds (LPPFs). LPPFs are accounts that local units of government deposit mandatory payments from hospitals to use as an intergovernmental transfers (IGT) to HHSC. Hospitals that are not operated by a unit of government and provide inpatient services in each local jurisdiction pay into the fund, so the local jurisdiction can use this money as the non-federal portion of the Medicaid match. To date, multiple LPPFs are in operation across the state. Currently, LPPFs provide funding for several supplemental and directed payment programs, like Uncompensated Care supplemental payments and the Uniform Hospital Rate Increase Program.

LPPF Reporting Requirements

Since 2013 each legislative session has seen increases in the number of jurisdictions allowed to operate LPPFs. In 2019, House Bill 4289, Eighty-Sixth Legislature, Regular Session, 2019, provided authority for any jurisdiction not served by an LPPF to operate one.

As required by 2020–21 General Appropriations Act, Article II, Rider 26, Texas House Bill 4289, Eighty-sixth Legislature, 2019, and Texas Administrative Code Section 355.8068 all units of government operating an LPPF are required to report certain information to the Texas Health and Human Services Commission (HHSC). Per Rider 26 and Title 42 of the Code of Federal Regulations, §433.74, HHSC is required to report certain information related to Local Provider Participation Funds (LPPFs) to the Texas Legislature and CMS for each federal fiscal quarter.

LPPF Quarterly Reporting

Each unit of government operating a LPPF is required to submit a quarterly report with certain financial information to the Health and Human Services Commission. The report is due 10 days after the end of each federal fiscal quarter. Financial information reported to HHSC is used to satisfy state and federal reporting requirements and is updated quarterly.

A summary of the units of government that completed the reporting requirement is available and updated quarterly.

Review the LPPF Reporting Status – August 2020 (PDF)

Reporting for Quarters 2 and 3 were impacted by the coronavirus (COVID-19) public health emergency. They were not subject to a deadline because the Office of the Governor temporarily waived the penalty for non-compliance with Texas Administrative Code §355.8068.

View the map of LPPFs (PDF).

Frequently Asked Questions About LPPFs

What are LPPF mandatory payments?

Mandatory payments are financial assessments nonpublic hospitals pay based on their annual net patient revenue. Mandatory payments are collected by the unit of government operating the LPPF and can be used as the non-federal share of Medicaid payments for supplemental and directed payment programs like Uncompensated Care (UC) and Uniform Hospital Rate Increase Program (UHRIP).

The unit of government operating the LPPF determines the assessment rate annually. However, that rate cannot exceed 6 percent of total of the net patient revenue from all paying hospitals in district, county, or municipality.

What is an LPPF?

LPPFs are an optional method of finance for local governments to generate and collect local funding for Texas Medicaid supplemental and directed payment programs.

Which governmental entities operate LPPFs in Texas?

In 2019, House Bill 4289 provided authority statewide for all jurisdictions not served by an LPPF the ability to operate one. Twenty-eight jurisdictions have the authority to operate an LPPF.

  • City of Amarillo Hospital District
  • Angelina County
  • City of Beaumont
  • Bell County
  • Bexar County Hospital District
  • Bowie County
  • Brazos County
  • Cameron County
  • Cherokee County
  • Dallas County Hospital District
  • Ellis County
  • El Paso County Hospital District
  • Grayson County
  • Gregg County
  • Harris County Hospital District
  • Hays County
  • Hidalgo County
  • Lubbock County Hospital District
  • McLennan County
  • Nueces County Hospital District
  • Smith County
  • Tarrant County Hospital District
  • Taylor County
  • Tom Green County
  • Travis County Hospital District
  • Webb County
  • Wichita County
  • Williamson County

What does a local government operating an LPPF need to do to transfer funds to the state?

To transfer funds to HHSC, a local governmental entity must set up a unique TexNet account for the LPPF. This account must be separate from their non-LPPF accounts. In addition to setting up a TexNet account, you must have a unique LPPF Texas Identification Number (TIN) with HHSC in the event an IGT refund would need to be issued. To set up a TexNet account, you can go to https://texnet.cpa.state.tx.us/. Forms you will need to set up a unique TIN are an application for Texas Identification Number (PDF) and Direct Deposit Authorization (PDF).

How can my local jurisdiction establish an LPPF?

Prior to 2019, local jurisdictions requested authorization from the Texas Legislature to operate an LPPF. A local jurisdiction would work with its local legislator to get a bill enacted authorizing the jurisdiction to establish one. The legislation would identify the LPPF governing body's statutory responsibilities and powers.  In 2019, House Bill 4289 provided authority statewide for all jurisdictions not served by an LPPF the ability to operate one.

What regulations/laws do local governments operating an LPPF need to be aware of?

Rules governing LPPF reporting in the Texas Administrative Code can be found in Section 355.8068. For specific guidance regarding your local jurisdiction's LPPF, please refer to the authorizing statute that gave your jurisdiction the authority to create an LPPF. A list of legislation for each authorized LPPF and the year it was enacted can be found at the end of this document. You can look up legislation at: https://capitol.texas.gov/. In addition, please be familiar with federal regulations at 42 CFR 433.50 through 433.74.

What information do local governments operating LPPFs need to report to HHSC?

State law requires local governments operating LPPFs to report the following information on a quarterly basis to the Texas Health and Human Services Commission:

  • the rate used to determine the mandatory payment
  • a list of all paying hospitals
  • the amount of the mandatory payment required of each paying hospital
  • the amount of the mandatory payment received by the LPPF from each paying hospital
  • the sum of the mandatory payments received by the LPPF
  • the purpose for which the LPPF funds were expended or transferred and the amount and date for each transfer or expenditure.

Funds from an LPPF can be transferred to HHSC for which Medicaid programs?

There are two factors in determining whether LPPF funds may be used for Medicaid purposes. First, the enabling legislation of a particular LPPF must allow for a use. The legislation creating each LPPF varies. Check the specific bill of an LPPF to determine what restrictions may or may not exist regarding funding Medicaid programs. Second, HHSC must operate a program that accepts funds from an LPPF as the non-federal share of a Medicaid payment. To date, the following Medicaid programs may be funded via an LPPF, however more programs may be added in the future.

  • Uncompensated Care
  • UHRIP – Uniform Hospital Rate Increase Program
  • DSRIP – Delivery System Reform Incentive Payment

Do all hospitals in a jurisdiction pay into an LPPF?

The type of hospital that makes mandatory payments is a nonpublic hospital that provides inpatient services. "Inpatient hospital services" is a recognized class of health care services according to 42 CFR §433.56. Any hospital that provides inpatient services that is licensed within a jurisdiction that operates an LPPF is required to make mandatory payments. HHSC is launching a reporting system to ensure that all members of the class are making mandatory payments on an ongoing basis.

Who can I contact at HHSC for general questions about LPPFs?

Send your questions to: LPPF@hhsc.state.tx.us

Other Documents

Local Provider Participation Fund Legislation and Year Enacted

Jurisdiction Enacted Bill Session Year
Cameron County SB 1623 83R 2013
Hidalgo County SB 1623 83R 2013
Webb County SB 1623 83R 2013
City of Beaumont SB 1387 84R 2015
Bell County HB 2913 84R 2015
Bowie County SB 1587 84R 2015
Brazos County HB 3185 84R 2015
Cherokee County SB 1587 84R 2015
Gregg County SB 1587 84R 2015
Hays County HB 3175 84R 2015
McLennan County HB 2809 84R 2015
City of Amarillo Hospital District SB 2117 85R 2017
Angelina County HB 2995 85R 2017
Dallas County Hospital District HB 4300 85R 2017
Grayson County HB 2062 85R 2017
Smith County HB 2995 85R 2017
Tarrant County Hospital District SB 1462 85R 2017
Tom Green County HB 3398 85R 2017
Williamson County HB 3954 85R 2017
Lubbock County Hospital District SB 2448 86R 2019
Statewide HB 4289 86R 2019
Ellis County HB 4548 86R 2019
Bexar County Hospital District SB 1545 86R 2019
Harris County Hospital District HB 3459 86R 2019
Wichita County SB 2286 86R 2019
Travis County Hospital District SB 1350 86R 2019
Taylor County HB 1142 86R 2019
Nueces County Hospital District SB 2315 86R 2019
El Paso County Hospital District SB 1751 86R 2019