ex992.htm

28th Annual JPMorgan

Healthcare Conference

January 11, 2010

Forward-Looking Statements

Statements made in this presentation may contain "forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995), such as forecasts of future financial performance. Such statements involve risks and uncertainties and are
subject to change at any time. 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, including our ability to make acquisitions, incur
more indebtedness and refinance indebtedness on favorable terms; increasing labor costs and the shortage of qualified
healthcare personnel; the impact of current economic conditions on our liquidity, results of operations and our ability to collect
our receivables; 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 Forms 10-K and 10-KA and Quarterly Reports on Forms
10-Q and 10-QA, 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 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.

Furthermore, references to non-GAAP financial information and pro forma, normalized data contained herein are reconciled to
comparable GAAP financial information in our earnings release dated October 27, 2009, which is available on our website at
www.sunh.com and has been filed with the SEC on Form 8-K. 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 the Investor Relations Department of Sun 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 NE,
Albuquerque, NM 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.

References to “Sun” refer to Sun Healthcare Group, Inc. and its subsidiaries

Investment Highlights

• Solid balance sheet with leverage reducing every quarter

• The economy does not change the need for post-acute services

• Part of the solution to lowering healthcare costs

• Attractive industry fundamentals and reimbursement outlook

• Nationally diversified portfolio of facilities

• Focus on high-acuity patients

• Strong financial performance

• Robust cash flow

• Proven and experienced management team

Sun Healthcare Group

• SunBridge

– 205 inpatient facilities
19,700 patients/residents

– Significant facility ownership

• 93 Facilities - 45%

• SunDance

– 440+ contracts/328 non-affiliated

– Contract services, rehab agency,
management services

• CareerStaff

– More than 50% of business is in
hospital settings (also serves SNFs,
schools, prisons)

– Primary customer needs served are
for therapists

• SolAmor

– Targeted growth business

– Doubled revenues in 9/30/09 LTM

Private Pay
and Other

Skilled Mix

Medicaid

CareerStaff

Inpatient

SunDance

9/30/09 LTM Net Revenue

Total: $ 1.9 billion

% of 9/30/09 LTM Net Revenue

By Business Unit

25.0%

35.0%

40.0%

5.6%

88.9%

5.5%

Growth Story

Revenue

EBITDA
(Normalized)

($ in millions)

(a) Pro Forma with Harborside

(b) Unaudited estimate

$1,883.0

2008

2007 (a)

$1,718.7

2009 (b)

$1,823.5

($ in millions)

2008

$176.0

2007 (a)

$129.6

2009 (b)

$162.9

$1,942.0

2010 (c)

$171.1

2010 (c)

7.5%

margin

8.9%

margin

9.3%

margin

8.8%

margin

6.1%

increase

3.3%

increase

3.1%

increase

Nationally Diversified Portfolio Of Facilities

23,205 Licensed Beds in 25 States

22,423 Available Beds

205 inpatient facilities - 93 owned (45%)

2010 Guidance

(Dollars in millions, except EPS)	2010 Full-Year Guidance
	Low	High
Revenue	$ 1,930.0	$ 1,954.0
EBITDAR	$ 244.0	$ 250.0
EBITDA	$ 168.2	$ 174.0
Pre-tax earnings	$ 69.2	$ 73.8
Income from continuing operations	$ 40.8	$ 43.5
Diluted earnings per share	$ 0.92	$ 0.98
Diluted weighted average shares	44.5	44.5
EBITDAR margin	12.6%	12.8%
EBITDA margin	8.7%	8.9%

2010 Guidance Assumptions:

• compensation and benefits are expected to increase approximately 3 percent;

• center lease costs are expected to increase approximately 3.8 percent:

– 1.5 percent for built-in increases

– 2.3 percent related to facility modernization in cooperation with certain landlords

• non-recurring costs in 2010 of $2.5 million associated with completing the installation of the

first phase of our new clinical/billing platform, which will be fully implemented and operational

in third quarter 2010; and

Non-Operating Assumptions

• no additional acquisitions or dispositions;

• an average outstanding debt balance of $685 million with an average all-in interest rate of 7.4
percent;

• annual increase in depreciation and amortization of $5.0 million;

• capital expenditures of between $50 million and $55 million, principally for:

– routine maintenance and renovations for facilities and IT systems;

– the build-out of 570 suite beds for our Rehab Recovery Suites® in 2010, bringing our

total suite bed count up to 2,100 by the end of 2010, an increase of almost 38 percent; and

– the completion of our new clinical/billing platform.

• an effective income tax rate of 41 percent and 2010 cash income taxes paid between $8 million
and $10 million

Sun’s 2010 guidance is based on the continuing operations of the company and the following

additional assumptions:

Operating Assumptions

Reimbursement Update

Medicare

• Washington Healthcare Reform Update

• STRIVE (Staff Time and Resource Intensity
Verification project)

– Implementation proposed for FY 2011
(October 2010)

– Update current Resource Utilization Group
(RUG) system to RUG - IV

Medicaid

• 20 out of 25 states have frozen or reduced rates
in CY 2009, resulting in an estimated $5.4
million loss of expected revenue

SunBridge Key Strategies

• Enhance our clinical product

– Focus on specialty services -Solana/Rehab Recovery
Suites®

– Execute on systems/processes to ensure consistency

• Enhance Business Development activities to define
markets and train team

– Obtain strategic support data: demographics, hospital
sources

– Provide training, tools, tracking and standards to sales and
relationship management team

– Improve intake and admission process

• Upgrade physical assets and technology

– Reinvest in the “bricks and mortar”

– Upgrade clinical/billing and time and attendance technology
platforms

SunBridge Performance Metrics

Occupancy

(1) Occupancy excludes hospital

Q3 ‘08

Q3 ‘09

88.7%

87.9%

Q2 ‘09

87.7%

(3) Quality mix includes all non-Medicaid inpatient
revenues

Inpatient Revenue Quality Mix

Q2 ‘09

Q3 ‘09

Q3 ‘08

54.3%

54.9%

$172

$171

$352

$458

Inpatient Revenue Per Patient Day

$423

$371

$167

Medicaid

Private and Other

(Percentages represent change from prior period)

Q3 ‘08

Q3 ‘09

$175

Managed Care/Comm

Medicare Part A

3.0%

2.6%

5.4%

8.1%

(2) SNF beds only

Managed
Care

Skilled Mix as a % of Revenue

Q2 ‘09

32.2%

31.6 %

Q3 ‘09

Q3 ‘08

6.1%

37.4%

38.3%

Medicare

5.8%

6.5%

39.1%

32.6 %

Product Diversification

Rehab Recovery Suites®

• Separate and distinct units within
a center

• Enhanced therapy and clinical product

• Hospitality services - dedicated concierge

• Target short-term younger Medicare and
managed care patient

– Average unit size: 21 beds per center

– Cost/bed : $25,000/bed

– Development time: 6-9 months

• 1530 beds in 63 centers at the end of 2009

– Target 570 additional beds in 2010

Solana Alzheimer’s Care

• Separate and distinct units within
47 centers

• Designated program directors

• Structured schedule of activities

• 5.3 million U.S. citizens have
Alzheimer’s

– 3.4 million over age 71 have
dementia

– 1 out 8 persons over age of 65
have Alzheimer’s

• Target long-term stay residents through
community referrals

– Average unit size : 38 beds per
center

– Average occupancy: 90.9%

Rehab Recovery Suites

Skilled Mix % Based on
Patient Days

Centers w/ RRS units

Q3 ‘08

Q3 ‘09

5.2%

5.5%

15.9%

16.0%

2.9%

3.0%

15.5%

All other centers

15.0%

21.1%

21.5%

18.4%

18.0%

Managed Care

Medicare

Centers w/ RRS units

All other centers

89.8%

44.8%

88.4%

40.4%

Q3 ‘09

REX

Rehab

3rd Quarter 2009 Rehab %

SolAmor Hospice Key Strategies

• Focus on synergistic opportunity

– Approximately 10 percent of patients in each LTC center are
eligible for hospice services

• Complete rollout of new technology (Home Care Home Base)

• “A Novel Approach”

– Individualizing hospice care through alternative therapies and
final wishes

• Add Palliative Care as link from LTC to hospice

– Quality of Life Specialist

• Grow through acquisitions

– Focus where we have a large concentration of SunBridge
affiliated centers

– On October 1, 2009 we acquired regional hospice company

with ADC of approximately 300, annual revenues of

$17 million, and EBITDA margins of 20%

SolAmor Performance Metrics

Q3 ‘08

Q3 ‘09

340

546

ADC

Q3 ‘09

Q3 ‘08

Revenue

($ in millions)

$4.1

$7.2

EBITDA Margin

22.2%

8.3%

Q3 ‘08

Q3 ‘09

SunDance Key Strategies

• Enhance recruitment and retention

• Accelerate sales volume and new sales contribution

• Augment customer service and contract retention
priorities

• Execute product installation and standardization

– Customized clinical products for growing ALF/CCRC market
segment

• Improve margin

– Exit strategies for non-profitable business sites

– Grow favorable payor mix

Q3 ‘08

Q3 ‘09

$44.5

$45.0

Revenue

($ in millions)

Q2 ‘09

$38.3

Revenue / Contract

($ in thousands)

$86.9

$99.6

Q3 ‘08

Q3 ‘09

Q2 ‘09

$100.2

Q3 ‘09

Q2 ‘09

7.3%

6.1%

EBITDA Margin

Q3 ‘08

5.0%

Non-Affiliated Contracts

Q3 ‘08

Q2 ‘09

Q3 ‘09

325

326

328

CareerStaff Key Strategies

• Extend service areas in all marketplaces

– Increased focus on virtual markets to expand geographical
coverage

• Focus on long term assignments

• New service offerings

– Weekend only therapy placements to acute care hospitals

• Strengthen Locum Tenens

– Introduce additional specialties: radiology, OB Gyn, and pediatrics

– Improve growth in: general surgery, anesthesiology and primary
care

• Public school system

• Home healthcare

– Focus on start-of-care evaluations

• Aggressive implementation of Tax Free Advantage Program (TFAP)

– Intended as a way to offset margin erosion

Q3 ’09 Revenue

By Type

60.7%

25.4%

7.7%

6.2%

Pharmacy

Allied

Nursing

Physician Services

CareerStaff Unlimited Performance Metrics

EBITDA Margin

8.9%

9.5%

Q3 ‘08

Q3 ‘09

Q2 ‘09

9.3%

Q3 ‘08

Q3 ‘09

Revenue

($ in millions)

Q2 ‘09

$30.1

$26.7

$24.4

Sun’s Commitment to Quality

• Published 1st annual report
on quality

– Quality First Pledge

– Advancing Excellence
Campaign

• Key metrics ahead of
national peers

p. 2 Letter from Our CEO

p. 3 Our Public Commitments to Quality Improvement

p. 7 About Our Nursing Centers

p. 9 Our Approach to Quality and its Measurement

p. 10 Quality Information

p. 18 Enhancing the Quality of Our Residents’ Lives

p. 20 About Our Employees

p. 22 Employee Spirit and Achievement

p. 24 Investing in Our Future

(Can be found on our website @ www.sunh.com)

(dollars in thousands, except per share data)	2008
	2009
Revenue	$470,893	$455,757
Depreciation and amortization	11,460	10,165
Interest expense, net	12,231	13,070
Income from continuing operations	10,389	9,421 $ 57,351
EBITDAR normalized	$ 60,366
Margin - EBITDAR normalized	12.8%	12.6%

EBITDA normalized	$ 42,172	$ 38,942
Margin - EBITDA normalized	9.0%	8.5%
Income from continuing operations - normalized	$ 10,903	$ 9,421
Diluted earnings per share - normalized	$0.25	$0.21

Sun 3rd Quarter 2009 Results

3rd Quarter Ended September 30,

Actual Results

Interest
Rate

Debt Table - September 2009

9.57%

5.21%

6.79%

11.76%

6.85%

5.76%

($ in millions)

330.0

Term Loans

$ -

Revolving Credit Facility - $50 million

$ 702.6

200.0

502.6

0.9

171.7

$ 117.4

Total Debt

Subordinated Debt

Senior Secured Debt

Capital Leases

Mortgage Debt

Debt:

Cash

Debt

Credit Statistics

<4.25x

2009

Credit Statistics

174.9

172.3

EBITDA (LTM Normalized Pro Forma)

53.5

54.2

Interest Expense

3.59x

$618.6

June 30, 2009

Required Bank Covenants

3.40x

Total Net Debt/EBITDA

$595.2

Total Net Debt (1)

Sept 30, 2009

(1) Total Debt reduced by cash balances in excess of $10 million

Total Net Debt/EBITDA

*All amounts calculated as defined in Sun’s Credit Agreement

2010

<3.50x

($ in millions)

Average Weighted Cost of Debt

Debt Type	Outstanding	% of Total	Average Rate (2)
Variable	$205.1	29%	3.40%
Fixed (1)	497.5	71%	8.27%
Total	$702.6	100%	6.85% (3)

1) Includes $150 million of term loans fixed via an interest rate swap

2) Includes amortization of deferred financing costs

3) 17 basis points lower than June 30, 2009

Variable vs. Fixed

As of September 30, 2009

($ in millions)

Strong Free Cash Flow

($ in millions)
Cash flow from operations	$87.8	$92.0
Capital expenditures	(42.5)	(41.5)
Free cash flow	$45.3	$50.5
Projected FYE 2009		$48 to $53

(1) Includes $7.1 million related to converting a portion of restricted cash to a letter of credit

Nine Months

2009 (1)

FYE

2008