SOURCE: Sun Healthcare Group, Inc.

Sun Healthcare Group, Inc.

May 02, 2011 07:00 ET

Sun Healthcare Group, Inc. Comments on CMS Proposed Reimbursement for Fiscal Year 2012

IRVINE, CA--(Marketwire - May 2, 2011) - Sun Healthcare Group, Inc. (NASDAQ: SUNH) today issued the following comments in response to the proposed rule released last week by the Centers for Medicare and Medicaid Services (CMS) regarding fiscal 2012 reimbursement for skilled nursing facilities. In the proposal, CMS outlined two approaches to address the Medicare payment system; one that reduces Medicare payments by more than 11 percent, based on three months of data, and the second approach that provides for more time to evaluate the overall effectiveness of the new system.

"Sun is supportive of CMS's intent to create an equitable, sustainable payment structure for skilled nursing facilities," said William A. Mathies, Sun's chairman and chief executive officer. "However, we believe that relying on only a limited set of data for this process puts at risk our ability to continue providing quality, accessible care to post-acute patients. Sun strongly urges CMS to adopt a more measured approach to this evaluation and thus allow more time to pass and data to develop before making any significant recommendations for change."

"The simultaneous implementation on Oct, 1, 2010 of a new assessment tool (MDS 3.0) for Medicare patients and the revised reimbursement system, Resource Utilization Group IV (RUG-IV) created significant new costs in the provision of care to post-acute patients," Mathies continued. "We believe that looking simply at total Medicare per diem outlays to skilled nursing facilities fails to capture these increased costs. In addition, the combination of increased admissions activity and declining length of stay is a strong indication of the demand for post-acute services and our ability to treat these patients effectively, creating significant savings in the Medicare program related to acute-care hospital outlays and cost per episode of care. The skilled nursing sector provides real value to both the health care system and its beneficiaries by allowing for patients to more quickly transition out of an acute hospital setting and back to their home environment."

Mathies concluded, "Our partners at CMS have historically treated our industry fairly from a reimbursement standpoint, gathering all the appropriate information to inform its payment decisions. In response to this proposed rule, Sun will work to ensure that CMS is provided with adequate data to help make appropriate future decisions regarding payment rates to skilled nursing facilities. We will do so based on our own data and in collaboration with the Alliance for Quality Nursing Home Care (www.aqnhc.org) and the American Health Care Association."

About Sun Healthcare Group, Inc.

Sun Healthcare Group, Inc. (NASDAQ: SUNH) is a healthcare services company, serving principally the senior population, with consolidated annual revenues in excess of $1.9 billion and approximately 30,000 employees in 46 states. Sun's services are provided through its subsidiaries: as of March 31, 2011, SunBridge Healthcare and its subsidiaries operate 163 skilled nursing centers, 16 combined skilled nursing, assisted and independent living centers, 10 assisted living centers, two independent living centers and eight mental health centers with an aggregate of 22,916 licensed beds in 25 states; SunDance Rehabilitation provides rehabilitation therapy services to affiliated and non-affiliated centers in 36 states; CareerStaff Unlimited provides medical staffing services in 39 states; and SolAmor Hospice provides hospice services in 10 states. For more information, go to www.sunh.com.

Forward-looking Statements

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. Forward-looking statements in this release include all statements regarding the plans and objectives of management for future operations, including the impact of changes in the Medicare payment system. Factors that could cause actual results to differ are identified in filings made by the Company with the Securities and Exchange Commission and include changes in Medicare and Medicaid reimbursements; the impact that healthcare reform legislation will have on the Company's business; the ability to maintain the occupancy rates and payor mix at the Company's healthcare centers; potential liability for losses not covered by, or in excess of, insurance; the effects of government regulations and investigations; the ability of the Company to collect its accounts receivable on a timely basis; the significant amount of the Company's indebtedness; covenants in debt agreements that may restrict the Company's activities, including the Company's ability to make acquisitions and incur more indebtedness on favorable terms; the impact of the current economic downturn on the business; increasing labor costs and the shortage of qualified healthcare personnel; and the Company's ability to receive increases in reimbursement rates from government payors to cover increased costs. More information on factors that could affect the Company's business and financial results are included in Sun's filings made with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Report on Form 10-Q, copies of which are available on Sun's web site, www.sunh.com. There may be additional risks of which the Company is presently unaware or that it currently deems immaterial.

The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control. Sun cautions investors that any forward-looking statements made by Sun are not guarantees of future performance and are only made as of the date of this release. Sun disclaims 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.

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