Allowance for Doubtful Accounts

The allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings and is included in the costs of services provided caption in our consolidated statements of comprehensive income. The allowance for doubtful accounts is evaluated based on our ongoing review of accounts and notes receivable and is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

We have had varying collections experience with respect to our accounts and notes receivable. We have sometimes been required to extend the period of payment for certain clients beyond contractual terms. Such clients include those who have terminated service agreements and slow payers experiencing financial difficulties. In order to provide for these collection problems and the general risk associated with the granting of credit terms, we have recorded the following bad debt provisions (in an Allowance for Doubtful Accounts):



	Year Ended December 31,
	2016		2015		2014
	(in thousands)
Bad debt provision	$	4,629	$	4,335	$	4,470

In making our credit evaluations, in addition to analyzing and anticipating, where possible, the specific cases described above, we consider the general collection risk associated with trends in the long-term care industry. We establish credit limits, perform ongoing credit evaluation and monitor accounts to minimize the risk of loss. Despite our efforts to minimize credit risk exposure, our clients could be adversely affected if future industry trends change in such a manner as to negatively impact their cash flows. If our clients experience a negative impact on their cash flows, it could have a material adverse effect on our results of operations and financial condition.

Impaired Notes Receivable

We evaluate our notes receivable for impairment quarterly and on an individual client basis. Notes receivable are generally evaluated for impairment when the respective clients are either in bankruptcy, are subject to collections activity or are slow payers that are experiencing financial difficulties. In the event that our evaluation results in a determination that a note receivable is impaired, it is valued at the present value of expected cash flows or at the market value of related collateral. Summary schedules of impaired notes receivable, and the related reserve, for the years ended December 31, 2016, 2015 and 2014 are as follows:



	Impaired Notes Receivable
Year Ended December 31,	Balance Beginning of Year		Additions		Deductions		Balance End of Year		Average Outstanding Balance
	(in thousands)
2016	$	6,471	$	—	$	786	$	5,685	$	6,078
2015	$	10,208	$	395	$	4,132	$	6,471	$	8,340
2014	$	2,892	$	9,124	$	1,808	$	10,208	$	6,550



	Reserve for Impaired Notes Receivable
Year Ended December 31,	Balance Beginning of Year		Additions		Deductions		Balance End of Year
	(in thousands)
2016	$	2,139	$	280	$	—	$	2,419
2015	$	3,031	$	99	$	991	$	2,139
2014	$	2,019	$	2,489	$	1,477	$	3,031

For impaired notes receivable, interest income is recognized on a cost recovery basis only. As a result, no interest income was recognized on impaired notes receivable. We follow an income recognition policy on all other notes receivable that does not recognize interest income until cash payments are received. This policy was established, recognizing the environment of the long-term care industry, and not because such notes receivable are necessarily impaired. The difference between income recognition on a full accrual basis and cash basis, for notes receivable that are not considered impaired, is not material.