| x    Annual      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act      of 1934                                                                                                                                                                          |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| For      the fiscal year ended December 31, 2007                                                                                                                                                                                                                                                 |
| OR                                                                                                                                                                                                                                                                                                    |
| o    Transition      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act      of 1934For      the transition period from                 to            |

| Delaware(State      of Incorporation) | 85-0410612(I.R.S.      Employer Identification No). |
|---------------------------------------|----------------------------------------------------------|

| Title of Each ClassCommon      Stock, par value $.01 per share | Name of Exchange on Which      RegisteredThe      NASDAQ Stock Market LLC (Nasdaq Global Select  Market) |
|----------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|

|   | Securities      registered pursuant to Section 12(g) of the Act:  None |
|--------|----------------------------------------------------------------------------------|

| Large      accelerated filero                                                 | Accelerated      filerx    |
|-------------------------------------------------------------------------------|---------------------------------|
| Non-accelerated      filero(Do      not check if a smaller reporting company) | Smaller      reporting companyo |

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| (a)    | (1)      | The      following consolidated financial statements of Sun Healthcare Group, Inc.      and subsidiaries are filed as part of this report under Item 8 –      “Financial Statements and Supplementary Data”: |
|--------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |     |
|   |     | Reports      of Ernst & Young LLP, Independent Registered Public Accounting      Firm                                                                                                                                      |
|   |     |                                                                                                                                                                                                                           |
|   |     | Consolidated      Balance Sheets as of December 31, 2007 and 2006                                                                                                                                                              |
|   |     |                                                                                                                                                                                                                           |
|   |     | Consolidated      Income Statements for the years ended December 31, 2007, 2006 and      2005                                                                                                                                  |
|   |     |                                                                                                                                                                                                                           |
|   |     | Consolidated      Statements of Stockholders’ Equity (Deficit) for the years ended December      31, 2007, 2006 and 2005                                                                                                 |
|   |     |                                                                                                                                                                                                                           |
|   |     | Consolidated      Statements of Cash Flows for the years ended December 31, 2007, 2006 and      2005                                                                                                                           |
|   |     |                                                                                                                                                                                                                           |
|   |     | Notes      to Consolidated Financial Statements                                                                                                                                                                                |
|   |     |                                                                                                                                                                                                                           |
|   | (2)      | Financial      schedules required to be filed by Item 8 of this form, and by Item      15(a)(2) below:                                                                                                                         |
|   |     |                                                                                                                                                                                                                           |
|   |     | Schedule      II Valuation and Qualifying Accounts for the years ended December 31,      2007, 2006 and 2005                                                                                                                   |
|   |     |                                                                                                                                                                                                                           |
|   |     | All      other financial schedules are not required under the related instructions      or are inapplicable and therefore have been omitted.                                                                                   |
|   |     |                                                                                                                                                                                                                           |
| (b)    | Exhibits |                                                                                                                                                                                                                           |

| Exhibit |                                                                                                                                                                   |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  | Description of Exhibits                                                                                                                                                |
|    |                                                                                                                                                                   |
| 2.1(1)  | Agreement      and Plan of Merger dated October 19, 2006 by and among Sun Healthcare      Group, Inc., Horizon Merger, Inc. and Harborside Healthcare      Corporation |
|    |                                                                                                                                                                   |
| 3.1#    | Amended      and Restated Certificate of Incorporation of Sun Healthcare Group, Inc.,      as amended                                                                  |
|    |                                                                                                                                                                   |
| 3.2(3)  | Amended      and Restated Bylaws of Sun Healthcare Group, Inc.                                                                                                         |
|    |                                                                                                                                                                   |
| 4.1(2)  | Sample      Common Stock Certificate of Sun Healthcare Group,  Inc.                                                                                                    |

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| 4.2(4)         | Form      of Warrant issued by Sun Healthcare Group, Inc. in February 2004 to each      of the purchasers named on the list of purchasers attached      thereto                                                                                                                       |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                                                                                                                  |
| 4.3(4)         | Form      of Registration Rights Agreement dated February 2004 between Sun      Healthcare Group, Inc. and the purchasers named on the list of purchasers      attached thereto                                                                                                       |
|           |                                                                                                                                                                                                                                                                                  |
| 4.4(5)         | Registration      Rights Agreement dated as of May 16, 2005, by and among Sun Healthcare      Group, Inc., the stockholders of Peak Medical Corporation named therein      and James A. Parsons, as Stockholders Agent                                                                |
|           |                                                                                                                                                                                                                                                                                  |
| 4.4.1(6)       | Amendment      No. 1, dated as of July 7, 2005, to the Registration Rights Agreement,      dated as of May 16, 2005, by and among Sun Healthcare Group, Inc., the      stockholders of Peak Medical Corporation named therein and James A.      Parsons, as Stockholders Agent        |
|           |                                                                                                                                                                                                                                                                                  |
| 4.4.2(7)  | Agreement,      dated as of January 17, 2007, by and between Sun Healthcare Group, Inc.,      DFW Capital Partners, L.P., Steelhead Investments Ltd. and, for purposes      of Sections 3 and 4 of the Agreement only, RFE Investment Partners V, L.P      and RFE VI SBIC, L.P.      |
|           |                                                                                                                                                                                                                                                                                  |
| 4.4.3(8)       | Agreement      dated as of May 9, 2007 by and among Sun Healthcare Group, Inc., RFE      Investment Partners V, L.P. and RFE VI SBIC, L.P.                                                                                                                                            |
|           |                                                                                                                                                                                                                                                                                  |
| 4.5(9)         | Indenture,      dated as of April 12, 2007, between the Sun Healthcare Group, Inc.,      the subsidiaries of Sun Healthcare Group, Inc., named therein and Wells      Fargo Bank, National Association, as Trustee                                                               |
|           |                                                                                                                                                                                                                                                                                  |
| 4.5.1(10)      | First      Supplemental Indenture, dated as of April 19, 2007, among Sun Healthcare      Group, Inc., Harborside, certain subsidiaries of Harborside named therein      and Wells Fargo Bank, National Association, as Trustee                                                        |
|           |                                                                                                                                                                                                                                                                                  |
| 4.6(9)         | Registration      Rights Agreement, dated April 12, 2007, among Sun Healthcare Group,      Inc., the subsidiaries of Sun Healthcare Group, Inc. named therein and the      Initial Purchasers of the Notes issued pursuant to the above described      Indenture.                |
|           |                                                                                                                                                                                                                                                                                  |
| 4.6.1(10)      | Joinder      to the Registration Rights Agreement, dated April 19, 2007, among      Harborside, the subsidiaries of Harborside named therein and the Initial      Purchasers of the Notes issued pursuant to the above described      Indenture.                                      |
|           |                                                                                                                                                                                                                                                                                  |
| 4.7(14)        | Escrow      Agreement, dated as of April 12, 2007, between the Company and Wells Fargo      Bank, National Association, as Escrow Agent                                                                                                                                               |
|           |                                                                                                                                                                                                                                                                                  |
| 4.8            | The      Registrant has instruments that define the rights of holders of long-term      debt that are not being filed herewith, in reliance upon Item 601(b)(iii)      of Regulation S-K. The Registrant agrees to furnish to the SEC, upon      request, copies of these instruments |
|           |                                                                                                                                                                                                                                                                                  |
| 10.1(10)       | Credit      Agreement, dated as of April 19, 2007, among Sun Healthcare Group, Inc.,      the Lenders named therein and Credit Suisse, as Administrative Agent and      Collateral Agent for the Lenders                                                                              |
|           |                                                                                                                                                                                                                                                                                  |
| 10.2(11)+      | Amended      and Restated 2002 Non-Employee Director Equity Incentive Plan of Sun      Healthcare Group, Inc.                                                                                                                                                                         |
|           |                                                                                                                                                                                                                                                                                  |
| 10.3(12)+      | 2004      Equity Incentive Plan of Sun Healthcare Group, Inc.                                                                                                                                                                                                                         |
|           |                                                                                                                                                                                                                                                                                  |
| 10.3.1(18)+    | Form      of Stock Option Agreement                                                                                                                                                                                                                                                   |

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|         |                                                                                                                                                              |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3.2(18)+  | Form      of Stock Unit Agreement                                                                                                                                 |
|         |                                                                                                                                                              |
| 10.4(13)+    | Peak      Medical Corporation 1998 Stock Incentive Plan                                                                                                           |
|         |                                                                                                                                                              |
| 10.5(14)+    | Employment      Agreement dated as of October 12, 2006 by and between Sun Healthcare      Group, Inc. and Richard Matros                                          |
|         |                                                                                                                                                              |
| 10.5.1(15)+  | Amendment      No. 1 to Employment Agreement effective as of October 31, 2007 by and      between Sun Healthcare Group, Inc. and Richard Matros                   |
|         |                                                                                                                                                              |
| 10.6(16)+    | Employment      Agreement by and between Sun Healthcare Group, Inc. and L. Bryan Shaul      dated as of February 14, 2005                                         |
|         |                                                                                                                                                              |
| 10.6.1(14)+  | Amendment      No. 1 to Employment Agreement dated as of October 12, 2006 by and between      Sun Healthcare Group, Inc. and L. Bryan Shaul                       |
|         |                                                                                                                                                              |
| 10.6.2(15)+  | Amendment      No. 2 to Employment Agreement effective as of October 31, 2007 by and      between Sun Healthcare Group, Inc. and L. Bryan Shaul                   |
|         |                                                                                                                                                              |
| 10.7(11)+    | Employment      Agreement by and between Sun Health Specialty Services, Inc. and William      A.  Mathies dated February 28, 2002                       |
|         |                                                                                                                                                              |
| 10.7.1(14)+  | Amendment      No. 1 to Employment Agreement dated as of October 12, 2006 by and between      Sun Health Specialty Services, Inc. and William A.  Mathies         |
|         |                                                                                                                                                              |
| 10.7.2(15)+  | Amendment      No. 2 to Employment Agreement effective as of October 31, 2007 by and      between Sun Health Specialty Services, Inc. and William A.      Mathies |
|         |                                                                                                                                                              |
| 10.8(17)+    | Employment      Agreement by and between Sun Healthcare Group, Inc. and Michael Newman      dated March 22, 2005                                                  |
|         |                                                                                                                                                              |
| 10.8.1(14)+  | Amendment      No. 1 to Employment Agreement dated as of October 12, 2006 by and between      Sun Healthcare Group, Inc. and Michael Newman                       |
|         |                                                                                                                                                              |
| 10.8.2(15)+  | Amendment      No. 2 to Employment Agreement effective as of October 31, 2007 by and      between Sun Healthcare Group, Inc. and Michael Newman                   |
|         |                                                                                                                                                              |
| 10.9(14)+    | Employment      Agreement dated as of October 12, 2006 by and between Sun Healthcare      Group, Inc. and Heidi J. Fisher                                         |
|         |                                                                                                                                                              |
| 10.9.1(15)+  | Amendment      No. 1 to Employment Agreement effective as of October 31, 2007 by and      between Sun Healthcare Group, Inc. and Heidi J. Fisher                  |
|         |                                                                                                                                                              |
| 10.10(14)+   | Employment      Agreement dated as of October 12, 2006 by and between Sun Healthcare      Group, Inc. and Chauncey J. Hunker                                      |
|         |                                                                                                                                                              |
| 10.10.1(15)+ | Amendment      No. 1 to Employment Agreement effective as of October 31, 2007 by and      between Sun Healthcare Group, Inc. and Chauncey J.  Hunker              |
|         |                                                                                                                                                              |
| 10.11#+      | Director      Compensation Policy of Sun Healthcare Group, Inc. adopted as of May 16,      2007                                                                   |
|         |                                                                                                                                                              |

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| 10.12#     | Amended      and Restated Master Lease Agreement among Sun Healthcare Group, Inc. and      certain of its subsidiaries (as Lessees) and Omega Healthcare Investors,      Inc. and certain of its subsidiaries (as Lessors) dated February 1,      2008                        |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                                                                                                          |
| 10.13(5)   | Stockholders      Agreement dated as of May 16, 2005, by and among Sun Healthcare Group,      Inc., the stockholders of Peak Medical Corporation named therein and James      A. Parsons, as Stockholders Agent                                                               |
|       |                                                                                                                                                                                                                                                                          |
| 10.13.1(6) | Amendment      No. 1, dated as of July 7, 2005, to the Stockholders Agreement, dated as      of May 16, 2005, by and among Sun Healthcare Group, Inc., the stockholders      of Peak Medical Corporation named therein and James A. Parsons, as      Stockholders Agent       |
|       |                                                                                                                                                                                                                                                                          |
| 10.14.2(6) | Amendment      No. 2, dated as of September 16, 2005, to the Stockholders Agreement,      dated as of May 16, 2005, by and among Sun Healthcare Group, Inc., the      stockholders of Peak Medical Corporation named therein and James A.      Parsons, as Stockholders Agent |
|       |                                                                                                                                                                                                                                                                          |
| 14.1(19)   | Code      of Ethics for Chief Executive Officer, Financial Officers and Financial      Personnel                                                                                                                                                                              |
|       |                                                                                                                                                                                                                                                                          |
| 21.1*      | Subsidiaries      of Sun Healthcare Group, Inc.                                                                                                                                                                                                                               |
|       |                                                                                                                                                                                                                                                                          |
| 23.1*      | Consent      of Ernst & Young LLP                                                                                                                                                                                                                                    |
| 31.1#      | Section      302 Sarbanes-Oxley Certifications by Principal Executive      Officer                                                                                                                                                                                            |
|       |                                                                                                                                                                                                                                                                          |
| 31.2*      | Section      302 Sarbanes-Oxley Certifications by Principal Executive      Officer                                                                                                                                                                                            |
|       |                                                                                                                                                                                                                                                                          |
| 31.3#      | Section      302 Sarbanes-Oxley Certifications by Principal Financial and Accounting      Officer                                                                                                                                                                             |
|       |                                                                                                                                                                                                                                                                          |
| 31.4*      | Section      302 Sarbanes-Oxley Certifications by Principal Financial and Accounting      Officer                                                                                                                                                                             |
|       |                                                                                                                                                                                                                                                                          |
| 32.1#      | Section      906 Sarbanes-Oxley Certifications by Principal Executive      Officer                                                                                                                                                                                            |
|       |                                                                                                                                                                                                                                                                          |
| 32.2*      | Section      906 Sarbanes-Oxley Certifications by Principal Executive      Officer                                                                                                                                                                                            |
|       |                                                                                                                                                                                                                                                                          |
| 32.3#      | Section      906 Sarbanes-Oxley Certifications by Principal Financial and Accounting      Officer                                                                                                                                                                             |
|       |                                                                                                                                                                                                                                                                          |
| 32.4*      | Section      906 Sarbanes-Oxley Certifications by Principal Financial and Accounting      Officer                                                                                                                                                                             |

| (1)  | Incorporated      by reference from exhibits to our Form 8-K filed on October 25,      2006  |
|------|----------------------------------------------------------------------------------------------|
| (2)  | Incorporated      by reference from exhibits to our Form 8-A filed on March 6,      2002     |
| (3)  | Incorporated      by reference from exhibits to our Form 8-K filed on December 27,      2007 |
| (4)  | Incorporated      by reference from exhibits to our Form 8-K filed on February 20,      2004 |
| (5)  | Incorporated      by reference from exhibits to our Form 8-K filed on May 19,      2005      |
| (6)  | Incorporated      by reference from exhibits to our Form 10-Q filed on November 1,      2005 |
| (7)  | Incorporated      by reference from exhibits to our Form 8-K filed on January 18,      2007  |
| (8)  | Incorporated      by reference from exhibits to our Form 8-K filed on May 22,      2007      |
| (9)  | Incorporated      by reference from exhibits to our Form 8-K filed on April 18,      2007    |
| (10) | Incorporated      by reference from exhibits to our Form 8-K filed on April 25,      2007    |

| (11) | Incorporated      by reference from exhibits to our Form 10-Q filed on August 16,      2002 |
|------|---------------------------------------------------------------------------------------------|

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| (12) | Incorporated      by reference from Appendix B to our Proxy Statement filed on April 8,      2004 |
|------|---------------------------------------------------------------------------------------------------|
| (13) | Incorporated      by reference from exhibits to our Form S-8 filed on January 9,      2006        |
| (14) | Incorporated      by reference from exhibits to our Form 8-K filed on October 16,      2006       |
| (15) | Incorporated      by reference from exhibits to our Form 10-Q filed on November 1,      2007      |
| (16) | Incorporated      by reference from exhibits to our Form 10-K filed on March 3,      2005         |
| (17) | Incorporated      by reference from exhibits to our Form 8-K filed on November 30,      2005      |
| (18) | Incorporated      by reference from exhibits to our Form 10-K filed on March 8,      2007         |
| (19) | Incorporated      by reference from exhibits to our Form 10-Q filed on May 7,      2004           |

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|   | SUN      HEALTHCARE GROUP, INC.                                                                                                                                                                                            |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                       |
|   | By:    /s/ L. Bryan      Shaul                             |
|   |        L.      Bryan Shaul                                                                                                                                                              |
|   |        Chief      Financial Officer                                                                                                                                                     |

| January      8, 2009 |   |
|----------------------|--------|

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