Sun Healthcare

        Irvine, Calif. (April 30, 2008) - Sun Healthcare Group, Inc. (NASDAQ GS: SUNH) today announced results for the first quarter ended March 31, 2008.

Consolidated Results and Consolidated Pro Forma Results
     Total net revenue for the quarter ended March 31, 2008, was $458.2 million, up 74 percent compared to $262.6 million for the same period one year ago. Net income for the quarter ended March 31, 2008, was $8.6 million, compared to net income of $3.9 million for the same period one year ago. Diluted earnings per share for the quarter ended March 31, 2008, was $0.19 ($0.21 normalized) compared to $0.09 ($0.14 normalized pro forma) for the same period one year ago.
     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 Jan. 1, 2007. The table also contains the normalizing adjustments described in the text below.

     Normalized actual results for the quarter ended March 31, 2008, include pre-tax adjustments for a $1.5 million charge related to integration costs associated with the Harborside acquisition. Normalized pro forma results for the quarter ended March 31, 2007, include pre-tax adjustments totaling $6.5 million which were primarily related to a bad debt charge recorded by Harborside prior to the acquisition.
     On a normalized pro forma basis, comparing the quarter ended March 31, 2008, to the same period in 2007:
revenue increased $33.1 million, or 7.8 percent;
EBITDAR increased $12.5 million, or 27.1 percent;
EBITDAR margin improved 200 basis points to 12.8 percent;
EBITDA increased $14.0 million, or 54.8 percent;
EBITDA margin improved 270 basis points to 8.7 percent;
pre-tax income from continuing operations increased $5.3 million, or 51.8 percent;
our effective tax rate increased 290 basis points to 40.0 percent; and
income from continuing operations increased $2.9 million, or 44.8 percent.
    Commenting on the results, Richard K. Matros, chairman and chief executive officer of Sun, stated, "I am pleased with the continued strength of our operating results, particularly our ability to improve margins on a same store basis.  Our margins are the strongest we’ve experienced to date, with normalized EBITDAR margins up 200 basis points to 12.8 percent and EBITDA margins up 270 basis points to 8.7 percent, resulting in normalized EPS for the quarter of $0.21, up 44.8 percent. These results were driven by our ongoing success in the execution of initiatives focused on providing care for patients with higher acuity, as well as the ongoing integration activities related to the Harborside acquisition.  Throughout the quarter, these integration activities yielded $4.4 million in synergies, bringing our total synergies resulting from the acquisition of Harborside to $10.8 million. We expect to hit the high end of our $12 to $15 million in synergies by year end 2008."

Inpatient Business
     For its core inpatient business, on a normalized pro-forma basis (assuming the Harborside acquisition occurred at the beginning of 2007) comparing the quarter ended March 31, 2008, to the same period in 2007:

Quarter ended March 31, 2008 (pro forma):
revenue increased $28.1 million, or 7.4 percent, to $406.8 million from $378.7 million;
net segment EBITDAR increased $10.4 million, or 17.5 percent, to $69.9 million from $59.5 million;
net segment EBITDAR margin for 2008 was 17.2 percent compared to 15.7 percent in 2007;
net segment EBITDA increased $12.0 million, or 30.5 percent, to $51.4 million from $39.4 million;
net segment EBITDA margin for 2008 was 12.6 percent compared to 10.4 percent in 2007;
net segment income increased $15.0 million, or 61.5 percent, to $39.4 million from $24.4 million;
rehabilitation RUGS utilization increased 110 basis points to 84.2 percent as a percent of total Medicare days; and
Rehabilitation Extensive Service ("REX") days as a percent of total Medicare days increased 200 basis points to 40.6 percent.

    The revenue gain of $28.1 million in the quarter was primarily attributed to a:
$14.2 million increase in Medicare revenue due principally to Medicare customer base, part A rate growth, and part B volume growth;
$7.7 million increase in managed care/commercial insurance revenue due principally to an increased customer base;
$2.9 million increase in Medicaid revenue resulting from an $8.1 million rate improvement partially offset by a $5.2 million impact from a decrease in customer base; and
$3.3 million increase in private revenue due principally to improved rates.
     Matros further stated, "The shift in acuity in our skilled nursing beds continues to yield positive results for the company with the current quarter showing our strongest Medicare and skilled mix to date at 16.6 percent and 20.4 percent, respectively. The company had 38 Rehab Recovery Suites^SM open at the end of the quarter. We expect to have a minimum of 50 open by the end of 2008. In terms of other critical initiatives, the company has rolled out its new clinical systems. This roll-out was the result of a side-by-side analysis of Sun’s and Harborside’s systems, upgrading to a system that blends the best of both companies. Our inpatient operations will be further enhanced by the implementation of an electronic medical record system, which will be a major IT initiative beginning in the latter part of this year." Matros continued, "It is our firm belief that these initiatives will improve the clinical outcomes for our patients and residents, which is the right way to improve returns to all our stakeholders."

Ancillary Businesses
     For its ancillary businesses, on a pro-forma basis (assuming the Harborside acquisition occurred at the beginning of 2007) comparing the quarter ended March 31, 2008, to the same period in 2007:
revenue increased $8.7 million, or 15.1 percent, to $66.2 million from $57.5 million; and
EBITDA increased $1.3 million, or 41.9 percent, to $4.4 million from $3.1 million.

Conference Call
      Sun’s senior management will hold a conference call to discuss the Company’s 2008 first-quarter operating results on Thursday, May 1, 2008, at 10 a.m. Pacific / 1 p.m. Eastern. To listen to the conference call, dial (866) 288-0540 and refer to Sun Healthcare Group. A recording of the call will be available from 4 p.m. Eastern on May 1, 2008, until midnight Eastern on May 15, 2008, by calling (888) 203-1112 and using access code 3387483.

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.

     Statements made in this release that are not historical facts are "forward-looking" statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-looking statements may include, but are not limited to, statements containing words such as "anticipate," "believe," "plan," "estimate," "expect," "hope," "intend," "may" and similar expressions. Factors that could cause actual results to differ are identified in the public filings made by the company with the Securities and Exchange Commission and include changes in Medicare and Medicaid reimbursements; our ability to maintain the occupancy rates and payor mix at  our long-term care centers; potential liability for losses not covered by, or in excess of, our insurance; the effects of government regulations and investigations; the significant amount of our indebtedness, covenants in our debt agreements that may restrict our activities and our ability to incur more indebtedness; our ability to integrate the operations of Harborside and realize anticipated synergies; increasing labor costs and the shortage of qualified healthcare personnel; and our ability to receive increases in reimbursement rates from government payors to cover increased costs. More information on factors that could affect our business and financial results are included in our public filings made with the Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports on Forms 10-Q, copies of which are available on Sun’s web site, www.sunh.com.
     The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control. We caution investors that any forward-looking statements made by Sun are not guarantees of future performance. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.
     EBITDA and EBITDAR as used in this press release, and EBITDAM and EBITDARM as used in the accompanying tables, which are non-GAAP financial measures, are each reconciled to net income (loss) in the accompanying tables. In addition, the normalizing adjustments to EBITDA, EBITDAR, pre-tax income and income from continuing operations discussed in this press release and shown in the accompanying tables are non-GAAP adjustments.
     Any documents filed by Sun with the SEC may be obtained free of charge at the SEC’s web site at www.sec.gov. In addition, investors and stockholders of Sun may obtain free copies of the documents filed with the SEC by contacting Sun’s investor relations department at (505) 468-2341 (TDD users, please call (505) 468-4458) or by sending a written request to Investor Relations, Sun Healthcare Group, Inc. 101 Sun Avenue N.E., Albuquerque, N.M. 87109. You may also read and copy any reports, statements and other information filed by Sun with the SEC at the SEC public reference room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 or visit the SEC’s web site for further information.