David Logan, appearing on behalf of petitioners Social Care and Social Work Improvement Scotland, which has been pursuing legal action against the operators of Home Farm on Skye, said an inspection in the last 48 hours found residents are no longer seriously at risk in terms of their health.
The case against the home's operators HC-One was launched in March after it emerged 10 residents had died at the care home amid the outbreak.
Mr Logan, appearing via video link to the hearing at Inverness Sheriff Court, said questions remain over who will operate the home in the long-term and said that must be established before further decisions are made.
He said: "In the last 48 hours there has been a further inspection carried out of the home and although that inspection did raise some issues in relation to the use of PPE and indeed the storage of some medicine it's not maintained by the petitioners that the position is that people are currently seriously at risk in terms of their health.
"There is, however, a problem because the reason that's the situation is because NHS Highland became involved in the operation and the running of the home and effectively have taken over day-to-day control of that and they of course are not the registered service provider, that remains the respondent.
"One possibility that may happen going forward is that NHS Highland may take over the registration completely by making their own application, at which point the registration of the respondent may well be dismissed or voluntarily surrendered.
"The other possibility is that the respondent would return to being in day-to-day control of the home and that would be a major concern if the issues that were identified in the petition, which gave rise to the petition, have not been addressed in detail by means of a comprehensive business plan."
He asked for a further hearing in a few weeks to give HC-One the opportunity to clarify who will manage the home in the future and to give Social Care and Social Work Improvement Scotland the time to assess whether the proposals about how the home will be managed are satisfactory or not.
Malcolm Gunnyeon, representing HC-One, said the home is being run very much as a partnership between it and NHS Highland.
He said: "HC-One do remain the registered operator of the home and responsible for its management.
"There is a partnership between NHS Highland and HC-One which is currently operating the home and that partnership having resulted in the improvements which give rise to the interim suspension application being dropped.
"I don't accept that NHS Highland are currently running the home, it is a partnership of which HC-One is very much a part."
Sheriff Eilidh MacDonald said the application for interim suspension will be dropped and set a further procedural hearing for August 21.
Skye, Lochaber and Badenoch MSP Kate Forbes said: "The latest development regarding Home Farm demonstrates how seriously the Care Inspectorate are taking the standards of care and also how instrumental NHS Highland's involvement has been to date.
"The residents continue to get the highest possible care, and NHS Highland continues to play a leadership and management role at Home Farm.
"I am confident that NHS Highland will not walk away and are committed to sustaining high levels of care at Home Farm over the long term."
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