Continuity mistake: In the 1978 flashback scene, Michael does not have 6 bullet wounds in his chest from when Dr. Loomis shot him moments earlier.
Factual error: The morgue is located on the lowest floor of a hospital not on the patient rooms floor. And the blinds on the windows would certainly be closed. In this hospital they are open and people can see dead bodies. Never happen.
Plot hole: Tommy leads the mob after the 2nd escaped patient, thinking it's Michael, but Tommy should have known it wasn't Michael. He saw the patient on the TV at the bar at the beginning of the film.
Continuity mistake: After fake Michael jumps from the 5th or 6th floor of the hospital, Tommy and the others just take a few seconds to get to the street.
Continuity mistake: The mental patient jumps from the window facing the ground. When the crowd gathers around him he's face up on the ground.
Answer: The flashback occurs some time after the ending of the first movie. They likely just separated in the meantime.
TedStixon