904978--3/8/2007--SUN_HEALTHCARE_GROUP

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{competitive, industry, competition}

{acquisition, growth, future}

{regulation, government, change}

{personnel, key, retain}

{cost, operation, labor}

{stock, price, share}

{provision, law, control}

{capital, credit, financial}

{control, financial, internal}

{cost, contract, operation}

{product, liability, claim}

Healthcare reform legislation or regulatory action may adversely affect our business. SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES Possible changes in the case mix of residents and patients as well as payor mix and payment methodologies may significantly affect our profitability. Our proposed acquisition of Harborside may be delayed or not be consummated. We may not be able to successfully integrate our proposed acquisition of Harborside or realize the potential benefits of the acquisition, which could cause our business to suffer. SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES We will incur a significant amount of debt in connection with the proposed acquisition of Harborside. We are subject to a number of lawsuits and rely primarily on self-funded insurance programs for general and professional liability claims against us. Our healthcare operations are extensively regulated and adverse determinations against us could result in severe penalties, including loss of licensure and decertification. SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES We have in the past sustained losses, and may not be able to maintain profitability or generate sufficient operating cash flows to fund our operations. We face national, regional and local competition. State efforts to regulate the construction or expansion of healthcare providers could impair our ability to expand our operations or make acquisitions. We continue to be affected by an industry-wide shortage of qualified facility care-provider personnel and increasing labor costs. SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES Delays in collection of our accounts receivable could adversely affect our cash flows and financial condition. If we lose our key management personnel, we may not be able to successfully manage our business and achieve our objectives. We do not expect to pay any dividends for the foreseeable future. Delaware law and provisions in our Restated Certificate of Incorporation and Amended and Restated Bylaws may delay or prevent takeover attempts by third parties and therefore inhibit our stockholders from realizing a premium on their stock. SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

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904978--3/8/2007--SUN_HEALTHCARE_GROUP_INC