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        Irvine, Calif. (March 5, 2008) - Sun Healthcare Group, Inc. (NASDAQ GS: SUNH) today announced results for the fourth quarter and year ended Dec. 31, 2007.

Consolidated Results and Consolidated Pro Forma Results
     Total net revenue for the quarter ended Dec. 31, 2007, was $450.5 million, up 74 percent compared to $258.4 million for the comparable period one year ago. Net income for the quarter ended Dec. 31, 2007, was $35.4 million, compared to net income of $19.9 million for the comparable 2006 period. Diluted earnings per share for the quarter ended Dec. 31, 2007, was $0.79 compared to the $0.60 for the comparable period one year ago. In the quarter ended Dec. 31, 2007, the Company recorded a credit of $77.8 million associated with the partial reversal of a valuation allowance on a deferred tax asset. The $77.8 million credit included $30.7 million of income tax benefit reflected on the Company’s income statement and $47.1 million of credits recorded directly to the balance sheet, principally increasing the Company’s equity accounts. The partial reversal in 2007 was based on the Company’s history of profitability and the continuation of this profitability in the foreseeable future. Sun’s continued profitability in 2008 will likely result in additional income from the reversal of the remaining deferred tax asset valuation allowance. The pro forma information in the table below was prepared as if the acquisition of Harborside Healthcare Corporation, which closed in April 2007, had occurred on Oct. 1, 2006. The information in the table also contains the normalizing adjustments described below.


     Normalized actual results for the quarter ended Dec. 31, 2007, include pre-tax adjustments for $2.3 million of income from a settlement of a claim associated with a prior period acquisition, $3.5 million of income from adjustments of prior period self-insurance reserves ($0.9 million of which were related to discontinued operations), a $3.2 million charge associated with the refinancing of debt agreements and a charge of $1.0 million related to integration costs associated with the Harborside acquisition. Normalized actual results for the quarter ended Dec. 31, 2006, include pre-tax adjustments for $9.7 million of income from adjustments of prior period self-insurance reserves ($3.4 million of which were related to discontinued operations), a $2.8 million bad debt charge associated with acquired accounts receivable from a prior period acquisition and a $0.8 million charge to write-down a management fee receivable associated with a terminated management agreement. Normalized pro forma results for the quarter ended Dec. 31, 2006, include the three 2006 adjustments referred to above and also include adjustments for $0.2 million of Harborside merger costs and $0.2 million of costs related to Harborside investor fees.

     On a normalized pro forma basis, comparing the quarter ended Dec. 31, 2007, to the same period in 2006:
revenue increased $29.2 million, or 6.9 percent;
EBITDAR increased $8.4 million, or 17.7 percent;
EBITDAR margin improved 120 basis points to 12.4 percent;
EBITDA increased $10.7 million, or 40.6 percent;
EBITDA margin improved 200 basis points to 8.2 percent;
pre-tax income from continuing operations increased $4.2 million, or 45.3 percent;
income tax expense increased $5.1 million, or more than 100 percent; and
income from continuing operations decreased by $0.8 million, or 8.7 percent as a direct result of increased income tax expense.

     Commenting on the results, Richard K. Matros, chairman and chief executive officer of Sun, stated, "We are pleased that we have ended our best year on a strong note with $0.20 normalized EPS for the fourth quarter. For the year, we came in a penny shy of the high end of our upwardly revised November 2007 guidance at $0.63 EPS, which was $0.11 better than the high side of our original 2007 guidance. The guidance we issued last month for 2008 reflects confidence in our ability to continue to move margins on a same store basis. Our first quarter 2008 skilled mix trends are strong. The Harborside integration is proceeding as expected with an additional $2.8 million in synergies hitting the bottom line in the fourth quarter of 2007, bringing our total synergies realized for the year to $6.4 million. We expect to have a total of $10 million in synergies by the end of the first quarter of 2008 and expect to hit the high end of our $12 to $15 million in synergies by year end 2008. We will continue to focus in 2008 on margin improvement, integration activities, company wide process improvement initiatives, and activities that will result in a deleveraging of the balance sheet."
     Total net revenue for the year ended Dec. 31, 2007, was $1,587.3 million, up 58 percent compared to $1,004.9 million for the comparable 2006 period. Net income for the year ended Dec. 31, 2007, was $57.5 million compared to net income of $27.1 million for 2006. Diluted earnings per share for the year ended Dec. 31, 2007, was $1.33 compared to $0.85 in 2006.  The pro forma information in the table below was prepared as if the Harborside acquisition had occurred on Jan. 1, 2006. The information in the table also contains the normalizing adjustments described below.


     Normalized actual results for the 2007 fiscal year include pre-tax adjustments for $4.5 million of integration costs associated with the Harborside acquisition, $12.5 million of income from adjustments of prior period self-insurance reserves ($3.9 million of which were related to discontinued operations), $2.3 million of income from a settlement of a claim associated with a prior period acquisition, and $3.8 million in charges associated with the refinancing of debt agreements.  Normalized actual results for the 2006 fiscal year include pre-tax adjustments consisting of $17.7 million of income from adjustments of prior period self-insurance reserves ($6.0 million of which were related to discontinued operations), $0.2 million of retroactive wage costs related to prior period rate increases in California, a $2.8 million bad debt charge associated with acquired accounts receivable from a prior period acquisition, a $0.8 million charge to write-down a management fee receivable associated with a terminated management agreement, a $0.8 million credit to workers’ compensation expense as a result of the finalization of insurance reserves related to a prior period acquisition, a $1.0 million charge related to the termination of a hospice management contract and a $1.0 million charge related to additional depreciation associated with a prior period acquisition.  
     Normalized pro forma results for the 2007 fiscal year include the 2007 adjustments referred to above and also include a $5.9 million charge for losses on prior period Harborside accounts receivable and $0.5 million of costs related to Harborside investor fees and merger costs. Normalized pro forma results for the 2006 fiscal year include the 2006 adjustments referred to above and also include adjustments of $2.6 million for Harborside merger costs and $0.6 million for costs related to Harborside investor fees.
     On a normalized pro forma basis, comparing the 2007 year to the 2006 year:
revenue increased $102.0 million, or 6.2 percent;
EBITDAR increased $34.9 million, or 19.9 percent;
EBITDAR margin improved 130 basis points to 12.0 percent;
EBITDA increased $38.2 million, or 40.9 percent;
EBITDA margin improved 180 basis points to 7.5 percent;
pre-tax income from continuing operations increased $19.0 million, or 68.1 percent;
income tax expense increased $12.1 million, or more than 100 percent; and
income from continuing operations increased by $6.9 million, or 30.0 percent.

Inpatient Business
     For its core inpatient business, on a normalized pro forma basis (assuming the Harborside acquisition occurred at the beginning of the respective periods) comparing the quarter and year ended Dec. 31, 2007 to the same periods in 2006:
Quarter ended Dec. 31, 2007 (pro forma):
revenue increased $24.7 million, or 6.6 percent, to $401.3 million from $376.6 million;
net segment EBITDAR increased $5.3 million, or 8.6 percent, to $67.2 million from $61.8 million;
net segment EBITDAR margin for 2007 was 16.7 percent compared to 16.4 percent in 2006;
net segment EBITDA increased $7.6 million, or 18.5 percent, to $48.7 million from $41.1 million;
net segment EBITDA margin for 2007 was 12.1 percent compared to 10.9 percent in 2006;
net segment income increased $13.6 million, or 52.0 percent, to $39.8 million from $26.2 million;
rehabilitation RUGS utilization increased 260 basis points to 84.9 percent as a percent of total Medicare days; and
Rehabilitation Extensive Service ("REX") days as a percent of total Medicare days increased 240 basis points to 39.5 percent.

     The revenue gain of $24.7 million in the quarter was primarily attributable to:
a $10.7 million increase in Medicare revenue due principally to Medicare part A rate growth and part B volume growth;
a $3.3 million increase in managed care/commercial insurance revenue due principally to a higher customer base;
a $5.3 million increase in Medicaid revenue resulting from a $8.3 million rate improvement partially offset by a $3.0 million impact from a decrease in customer base; and
a $5.4 million increase in private revenue due principally to improved rates.

Year ended Dec. 31, 2007 (pro forma):
revenue increased $87.4 million, or 5.9 percent, to $1,557.6 million from $1,470.2 million;
net segment EBITDAR increased $28.9 million, or 12.3 percent, to $262.9 million from $234.1 million;
net segment EBITDAR margin for 2007 was 16.9 percent compared to 15.9 percent in 2006;
net segment EBITDA increased $32.1 million, or 21.0 percent, to $185.1 million from $152.9 million;
net segment EBITDA margin for 2007 was 11.9 percent compared to 10.4 percent in 2006; and
net segment income increased $40.6 million, or 41.7 percent, to $137.9 million from $97.3 million.

     Matros further stated, "The shift in acuity continues to be our primary focus in our inpatient segment. This focus is across all of our nursing centers with a particular emphasis on the development of our Rehab Recovery Suites (RRS) ^SM. The company had 33 RRS open at year end. We expect to have 38 open by the end of the first quarter with two more shortly thereafter, and anticipate at least 50 units open by the end of 2008. We are particularly pleased with the fourth quarter growth in Medicare and skilled mix both in terms of occupancy and as a percent of revenues. As expected we rebounded from the slight softness in Medicare occupancy we experienced in the second and third quarters of last year. This positive mix trend is continuing in 2008. We will continue to refine and execute our quality of care initiatives with an intensity that reflects the highest of priorities."

Ancillary Businesses
     For its ancillary businesses, on a pro forma basis (assuming the Harborside acquisition occurred at the beginning of the respective periods) comparing the quarter and year ended Dec. 31, 2007 to the same periods in 2006:
for the quarter, revenue increased $8.1 million, or 14.7 percent, to $62.9 million from $54.8 million;
for the quarter, EBITDA increased $0.9 million, or 21.2 percent, to $5.1 million from $4.2 million;
for the twelve month period, revenue increased $24.3 million, or 11.2 percent, to $240.9 million from $216.7 million; and
for the twelve month period, EBITDA increased $6.0 million, or 53.2 percent, to $17.2 million from $11.2 million.

Conference Call
      Sun’s senior management will hold a conference call to discuss the Company’s 2007 fourth-quarter operating results on Thursday, March 6, 2008, at 10 a.m. Pacific / 1 p.m. Eastern. To listen to the conference call, dial (877) 516-8526 and refer to Sun Healthcare Group. A recording of the call will be available from 4 p.m. Eastern on March 6, 2008, until midnight Eastern on March 13, 2008, by calling (800) 642-1687 and using access code 33305495.

About Sun Healthcare Group, Inc.
      Sun Healthcare Group, Inc., with executive offices in Irvine, California, owns SunBridge Healthcare Corporation and other affiliated companies that operate long-term and postacute care centers in many states. In addition, the Sun Healthcare Group family of companies provides therapy through SunDance Rehabilitation Corporation, hospice services through SolAmor Hospice and medical staffing through CareerStaff Unlimited, Inc.