Sun Healthcare Group, Inc. Addresses Deficit Reduction Act

Market Wire, February, 2006

Sun Healthcare Group, Inc. (NASDAQ: SUNH) addressed the Deficit Reduction Act passed by the House of Representatives on February 1, 2006. Pursuant to the Act, the Medicare home health rates were frozen effective as of January 1, 2006, thereby eliminating the previously announced 2.8 percent increase in rates. Richard K. Matros, Sun's chairman and chief executive officer explained, "The impact to SunPlus Home Health Services, Sun's home health subsidiary, is expected to be $0.9 million in revenue for calendar year 2006, an amount the Company views as immaterial and expects to mitigate through ongoing strategic initiatives in that business segment."

Matros added, "SunDance Rehabilitation Corporation, Sun's contract rehabilitation business, could also be impacted by the Deficit Reduction Act. Although the therapy cap, under existing law, went into effect at the beginning of the year, the Act provides for an exception process. The Centers for Medicare and Medicaid Services (CMS) is diligently working on regulations to implement such a process that is in the best interest of the beneficiaries. Management cannot assess, at this point, to what extent, if any, the exception process will negate the impact of the therapy cap since that process has not yet been confirmed. Management believes there are operational and structural initiatives that the Company can execute to mitigate any potential negative ramifications," continued Matros.

Mr. Matros also noted that the integration of Sun's recent acquisition of Peak Medical Corporation is proceeding as expected.

The Company will issue guidance for 2006 as soon as practical after taking into consideration the issues discussed above.

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. and home care through SunPlus Home Health Services, 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, including the impact of the Deficit Reduction Act and regulations implementing it; 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; our ability to integrate the operations of Peak Medical Corporation; 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 Form 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 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.

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 on its public reference room.

Contact: Investor Inquiries (505) 468-2341 Media Inquiries (505) 468-4582