3. REVENUE RECOGNITION AND VALUATION ACCOUNTS

We establish the amount of our allowance for doubtful accounts based upon factors relating to the credit risk of specific customers, current market conditions, and other information. Our allowance for doubtful accounts was approximately $5.4 million at September 30, 2016, and $5.2 million at December 31, 2015.

Revenues related to flights generated by our Air Medical segment are recorded net of contractual allowances under agreements with third party payors and estimated uncompensated care when the services are provided. The allowance for contractual discounts was $119.7 million and $103.6 million as of September 30, 2016 and December 31, 2015, respectively. The allowance for uncompensated care was $35.6 million and $41.9 million as of September 30, 2016 and December 31, 2015, respectively.

Included in the allowance for uncompensated care listed above is the value of services to patients who are unable to pay when it is determined that they qualify for charity care. The value of these services was $2.2 million for the quarters ended September 30, 2016 and 2015, respectively. The value of these services was $6.9 million and $7.0 million for the nine months ended September 30, 2016 and 2015, respectively. The estimated cost of providing charity services was $0.5 million and $0.4 million for the quarters ended September 30, 2016 and 2015, respectively. The estimated cost of providing charity services was $1.8 million and $1.5 million for the nine months ended September 30, 2016 and 2015, respectively. The estimated costs of providing charity services are based on a calculation that applies a ratio of costs to the charges for uncompensated charity care. The ratio of costs to charges is based on our Air Medical segment’s total expenses divided by gross patient service revenue.

The allowance for contractual discounts and estimated uncompensated care (expressed as a percentage of gross segment accounts receivable) was as follows:


	As of
	September 30, 2016			December 31, 2015
Allowance for Contractual Discounts		60	%		56	%
Allowance for Uncompensated Care		18	%		23	%

Under a three-year contract that commenced on September 29, 2012, our Air Medical affiliate provided multiple services to a customer in the Middle East, including helicopter leasing, emergency medical helicopter flight services, aircraft maintenance, provision of spare parts, insurance coverage for the customer-owned aircraft, training services, and base construction. Each of the major services mentioned above qualified as separate units of accounting under the accounting guidance for such arrangements. The selling price for each specific service was determined based upon third-party evidence and estimates. As discussed in greater detail elsewhere herein, this contract, after being extended one year, lapsed on September 30, 2016.

We have also established valuation reserves related to obsolete and slow-moving spare parts inventory. The inventory valuation reserves were $17.1 million and $15.4 million at September 30, 2016 and December 31, 2015, respectively.