Sun Healthcare

      Irvine, Calif. (May 4, 2005) - Sun Healthcare Group, Inc. (NASDAQ: SUNH) today announced results for the first quarter ended March 31, 2005.

Earnings
     For the quarter ended March 31, 2005, Sun reported total net revenues of $207.2 million and a net loss of $1.2 million, which included income of $0.3 million on discontinued operations, compared with total net revenues of $204.6 million and a net loss of $10.4 million for the quarter ended March 31, 2004, which included a $6.8 million loss on discontinued operations. For the quarter ended March 31, 2005, Sun reported a loss from continuing operations of $1.5 million as compared to a loss from continuing operations of $3.6 million for the same period in 2004. The 2005 first quarter EBITDAR from continuing operations was $12.9 million as compared to $10.2 million from continuing operations for the same period in 2004.
     "These results show a strong start in 2005, as evidenced by the Company’s quarter over quarter improvement," said Richard K. Matros, Sun’s chairman and chief executive officer. "We continue to be pleased with the improved performance in our operations and note that these results are consistent with the 2005 guidance that we provided in our March 2, 2005 earnings release."

Inpatient Business
      Net revenues from the inpatient services operations, which comprised 71.8 percent of Sun’s first quarter total net revenue from continuing operations, increased 2.9 percent to $148.8 million from $144.6 million for the same period in 2004. The revenue gain was primarily attributable to: (i) a 60 basis point improvement in Medicare patient mix to 13.9 percent from 13.3 percent of total occupancy, and (ii) higher per diem rates in all payor categories. The segment EBITDAR increased 26.4 percent to $20.1 million for the quarter ended March 31, 2005, from $15.9 million for the same period in 2004. "Our inpatient business continues to improve its key performance metrics as evidenced by our bottom-line improvement quarter over quarter," said Matros.

Ancillary Business
     Net revenues from Sun’s ancillary business operations, comprised of SunDance Rehabilitation Corporation, CareerStaff Unlimited, Inc., SunPlus Home Health Services, Inc., and SunAlliance Healthcare Services, Inc., net of intersegment eliminations, decreased $1.6 million, or 2.7 percent, to $58.4 million for the quarter ended March 31, 2005, from $60.0 million for the same period in 2004. The majority of this reduction in revenue was due to the impact of the 2003-2004 restructuring of our inpatient services operations on our rehabilitation services operations. Segment EBITDAR for the ancillary operations for the quarter ended March 31, 2005, decreased $1.1 million, or 18.6 percent, over the same period in 2004, to $4.8 million from $5.9 million. This decrease was primarily due to the aforementioned reduction in rehabilitation therapy service revenues. "Despite the quarter over quarter statistical decline, I am encouraged by two key improvements in our ancillary business operations during the first quarter of 2005. First, in our rehabilitation therapy services operations, annualized new sales were $7.9 million for the first quarter of 2005 as compared to annualized new sales revenues of $0.2 million for the same period in 2004." Matros continued, "Second, our temporary staffing services operations demonstrated continuing progress with a 5 percent increase in gross revenues and a 150 basis point improvement in EBITDA quarter over quarter."

Conference Call
     Sun’s senior management will hold a conference call to discuss the Company’s first quarter operating results on Thursday, May 5, at 1 p.m. EDT / 10 a.m. PDT. 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. EDT on May 5 until midnight EDT on May 11 by calling (800) 642-1687 and using access code 5583644.

About Sun Healthcare Group, Inc.
      Sun Healthcare Group, Inc., with executive offices located in Irvine, California, owns SunBridge Healthcare Corporation and other affiliated companies that operate long-term and postacute care facilities in many states. In addition, the Sun Healthcare Group family of companies provides therapy through SunDance Rehabilitation Corporation, medical staffing through CareerStaff Unlimited, Inc., home care through SunPlus Home Health Services, Inc., and medical laboratory and mobile radiology services through SunAlliance Healthcare Services, Inc.

Statements made in this release that are not historical facts, including our estimates regarding financial performance in 2005, 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; potential liability for losses not covered by, or in excess of, our insurance; the effects of government regulations and investigations; our ability to generate cash flow sufficient to operate our business; 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, copies of which are available at 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 us 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.