|**FORM 10-Q**                                                                                        
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|**SECURITIES AND EXCHANGE COMMISSION******                                                           
|**WASHINGTON, D.C.  20549******                                                                      
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|Quarterly Report Under Section 13 of 15(d)                                                           
|of the Securities Exchange Act of 1934                                                               
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|For quarter ended March 31, 2003                                                                     
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|**NATIONAL HEALTH REALTY, INC.**                                                                     
|(Exact name of registrant as specified in its Charter)                                               
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|Maryland                                                                                             
|(State or other jurisdiction of incorporation or                                                     
|organization                                                                                         
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|100 Vine Street                                                                                      
|Murfreesboro, TN                                                                                     
|(Address of principal                                                                                
|executive offices)                                                                                   
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|Registrant's telephone number, including area code (615) 890-2020                                    
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|Indicate by check mark whether the registrant                                                        
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|(1)     Has filed all reports required to be filed by Section 13 or 15(d), of the Securities Exchange
|Act of 1934 during the preceding 12 months.                                                          
|Yes X                                                                                                
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|(2)     Has been subject to such filing requirements for the past 90 days.                           
|Yes X                                                                                                
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|Indicate by check mark whether the registrant is an accelerated filer.  Yes x  No.                   
|                                                                                                     
|9,570,323 shares of common stock were outstanding as of April 30, 2003.                              



|**Item 1.  Financial Statements.**                 |               |             
|-------------------------------------------------- | ------------- | ------------
|                                                   |               |             
|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES     
|                                                   |               |             
|INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS     
|*(in thousands, except share amounts)*            
|                                                   |               |             
|                                                   | March 31,     | December 31,
|                                                   | 2003          | 2002        
|                                                   | *(unaudited)* |             
|ASSETS                                             |               |             
|Real estate properties:                            |               |             
|Land                                               | $  20,206     | $  20,206   
|Buildings and improvements                         | 153,761       | 153,761     
|                                                   | 173,967       | 173,967     
|Less accumulated depreciation                      | (36,594)      | (35,004)    
|Real estate properties, net                        | 137,373       | 138,963     
|                                                   |               |             
|Mortgage and other notes receivable                | 64,886        | 65,562      
|Interest and rent receivable                       | 249           | 459         
|Cash and cash equivalents                          | 8,023         | 5,696       
|Marketable securities                              | 3,454         | 3,618       
|Deferred costs and other assets                    | 649           | 643         
|Total Assets                                       | $214,634      | $214,941    
|                                                   |               |             
|LIABILITIES                                        |               |             
|Debt                                               | $  79,243     | $  79,488   
|Minority interest in consolidated subsidiaries     | 14,428        | 14,485      
|Accounts payable and other accrued expenses        | 1,104         | 1,074       
|Accrued interest                                   | 205           | 10          
|Dividends payable                                  | 3,182         | 3,182       
|Distributions payable to partners                  | 404           | 404         
|Deposit on real estate properties sold             | 2,197         | 1,822       
|Total Liabilities                                  | 100,763       | 100,465     
|                                                   |               |             
|Commitments, contingencies and guarantees          |               |             
|                                                   |               |             
|STOCKHOLDERS' EQUITY                               |               |             
|Cumulative convertible preferred stock,            |               |             
|$.01 par value; 5,000,000 shares                   |               |             
|authorized; none issued and outstanding            | ---           | ---         
|Common stock, $.01 par value;                      |               |             
|75,000,000 shares authorized;                      |               |             
|9,570,323 shares issued and outstanding            | 96            | 96          
|Capital in excess of par value of common stock     | 135,324       | 135,324     
|Cumulative net income                              | 45,102        | 42,361      
|Cumulative dividends                               | (66,622)      | (63,440)    
|Unrealized gains (losses) on marketable securities | (29)          | 135         
|Total Stockholders' Equity                         | 113,871       | 114,476     
|Total Liabilities and Stockholders' Equity         | $214,634      | $214,941    

*The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements.*

*The interim condensed balance sheet at December 31, 2002 is derived from the audited financial statements at that date.*

|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES      
|---------------------------------------------------
|                                                   
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|*(unaudited)*                                      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|REVENUES:                                          
|Rental income                                      
|Mortgage interest income                           
|Investment interest and other income               
|                                                   
|EXPENSES:                                          
|Interest                                           
|Depreciation of real estate                        
|Amortization of loan costs                         
|Realty and loan losses                             
|General and administrative                         
|                                                   
|                                                   
|INCOME BEFORE MINORITY INTEREST IN                 
|CONSOLIDATED SUBSIDIARIES                          
|                                                   
|MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES     
|                                                   
|NET INCOME                                         
|                                                   
|NET INCOME PER COMMON SHARE:                       
|Basic                                              
|Diluted                                            
|                                                   
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:        
|Basic                                              
|Diluted                                            
|                                                   
|Common dividends per share declared                

***The accompanying notes to interim condensed consolidated financial statements are an integral part of these
financial statements.*



|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES          
|-------------------------------------------------------
|                                                       
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|*(unaudited)*                                          
|                                                       
|                                                       
|                                                       
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|                                                       
|CASH FLOWS FROM OPERATING ACTIVITIES:                  
|Net income                                             
|Depreciation of real estate                            
|Realty losses                                          
|Amortization of loan costs                             
|Minority interest in consolidated subsidiaries         
|Decrease in interest and rent receivable               
|Increase in other assets                               
|Increase in accounts payable and accrued liabilities   
|NET CASH PROVIDED BY OPERATING ACTIVITIES              
|                                                       
|CASH FLOWS FROM INVESTING ACTIVITIES:                  
|Increase in deposit on real estate properties sold     
|Collection of mortgage notes receivable                
|NET CASH PROVIDED BY INVESTING ACTIVITIES              
|                                                       
|CASH FLOWS FROM FINANCING ACTIVITIES:                  
|Payments on long-term debt                             
|Dividends paid to stockholders                         
|Distributions paid to partners                         
|NET CASH USED IN FINANCING ACTIVITIES                  
|                                                       
|INCREASE IN CASH AND CASH EQUIVALENTS                  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD         
|CASH AND CASH EQUIVALENTS, END OF PERIOD               
|                                                       
|Supplemental Information:                              
|Cash payments for interest expense                     
|                                                       

*The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements.*



|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES                    
|-----------------------------------------------------------------
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002               
|*(dollars in thousands)*                                         
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|BALANCE AT 12/31/02                                              
|Net income                                                       
|Unrealized losses on marketable                                  
|securities, net                                                  
|Total comprehensive income                                       
|Dividends to common share-                                       
|holders ($.3325 per share)                                       
|                                                                 
|BALANCE AT 3/31/03                                               
|                                                                 
|BALANCE AT 12/31/01                                              
|Net income                                                       
|Dividends to common share-                                       
|holders ($.3325 per share)                                       
|                                                                 
|BALANCE AT 3/31/02                                               
|                                                                 

The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements.

**NOTE 1.  SIGNIFICANT ACCOUNTING POLICIES:**

The unaudited financial statements to which these notes are attached include, in our opinion, all
adjustments which are necessary to fairly present the financial position, results of operations and cash flows
of National Health Realty, Inc. (NHR or the Company) and its majority owned subsidiaries.  We assume that
users of these interim financial statements have read or have access to the audited December 31, 2003,
financial statements and Management's Discussion and Analysis of Financial Condition and Results of
Operations and that the adequacy of additional disclosure needed for a fair presentation, except in regard to
material contingencies, may be determined in that context.  See our web page at
www.nationalhealthrealty.com.  Accordingly, footnotes and other disclosures which would substantially
duplicate the disclosure contained in our most recent annual report to stockholders have been omitted.  This
quarter's interim financial information is not necessarily indicative of the results that may be expected for
a full year for a variety of reasons including changes in interest rates, rents, operations and the timing of debt
and equity financings.

**NOTE 2.  EARNINGS PER SHARE**:

Basic earnings per share is based on the weighted average number of common shares outstanding
during the year.

Diluted earnings per share assumes the exercise of stock options using the treasury stock method.

The following table summarizes the earnings and the average number of common shares and
common equivalent shares used in the calculation of basic and diluted earnings per share.

|                                            | Three Months Ended
|------------------------------------------- | ------------------
|                                            | March 31          
|                                            | 2003              
|BASIC:                                      |                   
|Weighted average common shares              | 9,570,323         
|Net income available to common stockholders | $2,741,000        
|                                            |                   
|Net income per common share                 | $           .29   
|                                            |                   
|DILUTED:                                    |                   
|Weighted average common shares              | 9,570,323         
|Stock options                               | 162,929           
|Average common shares outstanding           | 9,733,252         
|                                            |                   
|Net income available to common stockholders | $2,741,000        
|                                            |                   
|Net income per common share                 | $           .28   

******NOTE 3.  COMMITMENTS, CONTINGENCIES AND GUARANTEES:**

NHR began operating on December 31, 1997 after the exchange of NHR common stock for certain
assets of NHC including mortgage notes receivable and real property.  In order to protect the REIT status
of NHR, certain NHC unitholders received limited partnership units of NHR/OP, L.P. rather than shares of
common stock of NHR.  As a result of certain unitholders' involuntary acceptance of NHR/OP, L.P.
partnership units to benefit all other unitholders, we have indemnified those certain unitholders for any tax
consequence resulting from any involuntary conversion of NHR/OP, L.P. partnership units into shares of
NHR common stock.  The indemnification expires at such time as the NHR/OP, L.P. unitholders are in a
position to voluntarily convert their partnership units into NHR common stock on a tax free basis without
violating applicable REIT requirements.

We believe that we have operated our business so as to qualify as a REIT under Sections 856 through
860 of the Internal Code of 1986, as amended (the "Code") and we intend to continue to operate in such a
manner, but no assurance can be given that we will be able to qualify at all times.  If we qualify as a REIT,
we will generally not be subject to federal corporate income taxes on our net income that is currently
distributed to its stockholders.  This treatment substantially eliminates the "double "taxation" (at the
corporate and stockholder levels) that typically applies to corporate dividends.  Our failure to continue to
qualify under the applicable REIT qualification rules and regulations would cause us to owe state and federal
income taxes and would have a material adverse impact on our financial position, results of operations and
cash flows.

**NOTE 4. MORTGAGE NOTE CONTINGENCIES:**

*FCC Notes Receivable*

Approximately $44,616,000 of the mortgage and other notes receivable is due from Florida
Convalescent Centers, Inc. or affiliates (FCC) of Sarasota, Florida.  The notes bear interest at 10.25% and
the majority of the notes mature October 31, 2004.  The notes may be prepaid without penalty.  If
prepayment occurs, we will apply some or all of the proceeds against our bank term loan.  If not so used, we
will attempt to reinvest the balance available.  Our existing line of credit requires a portion of the
prepayments to be used to reduce bank debt.

Effective July 31, 1999, the 14 FCC centers were leased to Integrated Health Systems, Inc. (IHS),
which filed for bankruptcy protection on February 2, 2000.  Pursuant to court order, the IHS lease was
terminated and the FCC centers re-leased to Schwartzberg Associates, a private multi-state long-term care
company during the second quarter of  2002.  The ability of FCC to service the mortgage notes held by NHR
is dependent on Schwartzberg Associates' ability to make its lease payments to FCC.  As of March 31, 2003,
FCC has made all required payments to NHR under the terms of the note agreements.

Approximately $22,963,000 of our notes receivable from FCC are secured by second mortgages on
eight Florida nursing homes.  The first mortgage notes on these eight Florida nursing homes, totaling
approximately $18,705,000 at December 31, 2002, are tax exempt and are additionally secured with letters
of credit issued by Norwest Bank Minnesota N.A. Accordingly, Norwest Bank Minnesota N.A. holds a first
mortgage which is senior to NHR's second mortgage on these eight Florida nursing homes.

*Transfer of Notes Receivable to NHI*

Effective December 31, 2002, we transferred three mortgage notes receivable secured by three long-term care facilities in Florida with total principal balances outstanding and a total carrying amount of
$15,717,000 ($15,473,000 at March 31, 2003) to NHI.  We received cash from NHI equal to our carrying
amount.  The transfer agreement with NHI includes provisions that allow us the ability to repurchase the
transferred notes after July 1, 2003 at a price equal to the then outstanding principal and interest balance.
The agreement also provides that, beginning January 2, 2004, NHI may put the notes back to us at a price
equal to the then outstanding principal and interest balance or require us to make the debt service payments
required under the notes.  As the result of the repurchase and put options, consistent with the provisions of
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" (SFAS 140), we account for the transfer of notes receivable to
NHI as a borrowing rather than as a sale of the notes.  We continue to recognize the notes receivable on our
consolidated balance sheet as of March 31, 2003 in the amount of $15,473,000, and we continue to recognize
interest income on the notes.  Additionally, we have recognized an obligation to NHI in the amount of
$15,473,000 on our consolidated balance sheet as of March 31, 2003 and we recognize interest expense on
such obligation.

**NOTE 5.  INVESTMENT IN MARKETABLE SECURITIES**

On September 17, 2002, we purchased 225,000 shares of NHI common stock for approximately
$3,483,000.  At March 31, 2003, the fair value of the shares is $3,454,000.  This investment in marketable
securities is classified as an investment in securities available for sale. Unrealized gains and losses on
available for sale securities are recorded in stockholders' equity in accordance with SFAS No. 115.

**NOTE 6.  DISPOSITION OF REAL ESTATE:**

Effective January 1, 2001, we sold all of the real estate and equipment of the three long-term health
care centers under lease to Health Services Management of Indiana, LLC (HSMI).  Consideration for the sale
and assumption of the $1,630,000 first mortgage and the properties is in the form of new mortgage notes in
the total amount of $12,029,000.  We account for this transaction under the deposit method in accordance
with the provisions of Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real
Estate", (SFAS 66).  Consistent with the deposit method, we have not recorded the sale of the assets and
continue to record depreciation expense each period.  Any cash received from the buyer (which since the sale
totals $2,197,000 as of March 31, 2003) is reported as deposit on real estate properties sold until the down
payment and continuing investment criteria of SFAS 66 are met, at which time we will account for the sale
under the full accrual method.

**NOTE 7.  DEBT**

Our bank term loan, (principal balance at March 31, 2003 of $58,157,000) matures on December 31,
2003.  We plan to obtain proceeds from the refinancing of certain assets through first mortgage notes with
community banks and existing lenders in order to satisfy the debt obligation in 2003.  Although we believe
that we will be successful in refinancing our December 2003 debt obligation, no assurance can be given in
this regard.  Our cash flows from operating activities will not be adequate to retire the entire debt obligation.
The inability to obtain adequate refinancing prior to December 31, 2003 would have a material adverse effect
on our financial position, results of operation and cash flows.

**NOTE 8.  STOCK OPTION PLAN**

Our stockholders have approved the 1997 Stock Option and Appreciation Rights Plan under which
options to purchase shares of our common stock are available for grant to our consultants, advisors, directors
and employees at a price no less than the market value of the stock on the date the option is granted.  The
vesting period and term of the options is six years.  The following table summarizes option activity:

|                              |           | Weighted      
|----------------------------- | --------- | --------------
|                              | Number    | Average       
|                              | of Shares | Exercise Price
|Outstanding December 31, 1999 | 382,000   | $  8.50       
|Options granted               | 15,000    | 6.50          
|Outstanding December 31, 2000 | 397,000   | 8.42          
|Options granted               | 15,000    | 10.74         
|Outstanding December 31, 2001 | 412,000   | 8.51          
|Options granted               | 10,000    | 16.95         
|Outstanding December 31, 2002 | 422,000   | 8.71          

There have been no changes in options outstanding since December 31, 2002.  At March 31, 2003,
all options outstanding are exercisable.  Exercise prices on the options range from $6.50 to $16.95.  The
weighted average contractual life of options outstanding at March 31, 2003 is 2.6 years.  We have reserved
500,000 shares of common stock for issuance under the stock option plan.  At March 31, 2003, 66,802
additional options to purchase shares of common stock may be issued under the stock option plan.

Based on the number of options granted and the historical and expected future trends of factors
affecting valuation of those options, management believes that the additional compensation cost, as
calculated in accordance with SFAS 123, has no effect on our earnings per share.

**NOTE 9.  NEW ACCOUNTING PRONOUNCEMENTS**

****	In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, "Recission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections"
(SFAS 145).  SFAS 145 rescinds Statement of Financial Accounting Standards No. 4, "Reporting Gains and
Losses from Extinguishment of Debt" (SFAS 4), which required all gains and losses from extinguishment
of debt to be aggregated and, if material, classified as an extraordinary item, net of the related income tax
effect.  As a result, the criteria in APB 30 will now be used to classify those gains and losses.  The provisions
of SFAS 145 are effective for financial statements issued for fiscal years beginning after May 15, 2002, and
interim periods within those fiscal years.  We adopted the provisions of SFAS 145 effective January 1, 2003.
The adoption of SFAS 145 has not had a significant effect on our financial position, results of operations or
cash flows.

On December 31, 2002, the FASB issued Statement of Financial Accounting Standards No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" (SFAS 148).  SFAS 148 amends
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123), to provide alternative methods of accounting for stock-based employee compensation.  SFAS 148 also
amends the disclosure provision of SFAS 123 and APB Opinion No. 28, "Interim Financial Reporting", to
require disclosure in the summary of significant accounting policies of the effects of an entity's accounting
policy with respect to stock-based employee compensation on reported net income and earnings per share
in annual and interim financial statements.  While SFAS 148 does not amend SFAS 123 to require companies
to account for employee stock options using the fair value method, the disclosure provisions of SFAS 148
are applicable to all companies with stock-based employee compensation, regardless of whether they account
for the compensation using the fair value method of SFAS 123 or the intrinsic value method of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("ABP 15").  See Note 8 for
the required disclosures under SFAS 148.

******Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations**

OVERVIEW

National Health Realty, Inc. (NHR or the Company) is a real estate investment trust (REIT) that
began operations on January 1, 1998.  Currently our assets, through our subsidiary NHR/OP, L.P. (the
Operating Partnership), include the real estate of 26 health care facilities, including 19 licensed skilled
nursing facilities, six assisted living facilities and one independent living center (the Health Care Facilities).
We also own 33 first and second mortgage promissory notes with principal balances totaling $64,886,000
(the Notes) at March 31, 2003 and secured by the real property of health care facilities.  Our revenues are
derived primarily from rent and interest income form these real estate properties and mortgages receivable.
Our primary lessee is National HealthCare Corporation (NHC) and our primary mortgagee is Florida
Convalescent Centers, Inc. (FCC).  Management's primary concern is the refinancing at favorable terms of
its $58,157,000 term loan, which matures December 31, 2003.

*Competitive Restrictions-*

We have an Advisory Services Agreement with National HealthCare Corporation (NHC) pursuant
to which NHC will provide us with investment advice, office space and personnel. NHC owns or manages
78 long-term care health care facilities with 9,584 beds in 11 states.  The advisory services agreement
provides that prior to the earlier to occur of (i) the termination of the advisory agreement for any reason or
(ii) NHC ceasing to be actively engaged as the investment advisor for National Health Investors, Inc. (NHI),
we will not (without the prior approval of NHI) transact business with any party, person, company or firm
other than NHC. It is the intent of the foregoing restriction that we will not be actively or passively engaged
in the pursuit of additional investment opportunities, but rather will focus upon our capacities as landlord
and note holder of those certain assets we currently hold.



CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from
those estimates and cause our reported net income to vary significantly from period to period.

In December 2001, the SEC requested that all registrants list their three to five most "critical
accounting policies" in MD&A.  The SEC indicated that a "critical accounting policy" is one which is both
important to the portrayal of the Company's financial condition and results and requires management's most
difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect
of matters that are inherently uncertain.  We believe that our following accounting policies fit this definition:

*Valuations of and Impairments to Our Investment*s

Since 1999 the long-term health care industry has experienced material reductions in government
and private insurance reimbursements.  While some legislative relief was granted in 2000 and 2001,
additional reductions in reimbursement have been proposed for the next fiscal year of the federal
government.  The long-term health care industry has also experienced a dramatic increase in professional
liability claims and in the cost of insurance to cover such claims.  These factors have combined to cause a
number of bankruptcy filings, bankruptcy court rulings and court judgments about refinancing which have
effected some of our lessees and mortgagees.  Based on events occurring during the first quarter of 2003,
we determined that no impairments of our investments had occurred.

Decisions about valuations and impairments of our investments require significant judgements and
estimates on the part of management.  For real estate properties, the need to recognize an impairment is
evaluated on a property by property basis in accordance with Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("SFAS 144").  Recognition of an impairment is based upon estimated future cash flows
from a property compared to the carrying value of the property.  For notes receivable, impairment
recognition is based upon an evaluation of the estimated collectibility of loan payments and general
economic conditions on a specific loan basis in accordance with Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan - An Amendment of FASB
Statements No. 5 and 15".  While we believe that the carrying amounts of our properties and notes receivable
are realizable, it is possible that future events could require us to make significant adjustments or revisions
to these estimates.

*Revenue Recognition - Mortgage Interest and Rental Income*

We collect interest and rent from our customers.  Generally our policy is to recognize revenues on
an accrual basis as earned.  However, we may in the future determine that, based on insufficient historical
collections and the lack of expected future collections, revenue for interest or rent is not realizable.  For any
such nonperforming investments, our policy is to recognize interest or rental income only in the period when
payments are made.  This policy could cause our revenues to vary significantly from period to period.

*REIT Status and Taxes*

We believe that we have operated our business so as to qualify as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code") and we intend to continue to operate
in such a manner, but no assurance can be given that we will be able to qualify at all times.  If we qualify
as a REIT, we will generally not be subject to federal corporate income taxes on our net income that is
currently distributed to its stockholders.  This treatment substantially eliminates the "double taxation" (at
the corporate and stockholder levels) that typically applies to corporate dividends.  Our failure to continue
to qualify under the applicable REIT qualification rules and regulations would cause us to owe state and
federal income taxes and would have a material adverse impact on our financial position, results of
operations and cash flows.

CAPITAL RESOURCES AND LIQUIDITY

*Maturities*

At March 31, 2003, our bank debt as a percentage of total liabilities and capital was 36.9%.  Our debt
of $79,243,000 includes a term loan with a principal amount of $58,157,000.

In order to address our $58,157,000 of 2003 debt maturities and our potential 2004 obligation to
repurchase the $15,473,000 of mortgage notes from NHI, we plan to work with existing lenders to extend
the debt maturity and/or, if necessary, sell assets.  Although we believe that we will be successful in
refinancing our obligations, no assurance can be given in this regard.  Our cash flows from operating
activities will not be adequate to meet these entire obligations.  The inability to obtain adequate refinancing
prior to December 31, 2003 would have a material adverse effect on our financial position, results of
operation and cash flows.

*Leases*

We lease our 23 health care facilities to various lessees: 14 properties are leased to NHC, and nine
properties that were previously leased to NHC are leased to nine separate lessees not related to NHC.  With
respect to these nine properties, NHC remains obligated under its master lease agreement and continues to
remain obligated to make the lease payments to us.  Lease payments made to us from the new lessees are
credited against NHC's overall rent obligation.  At March 31, 2003, all payments are current.  Our leases
with NHC and the nine separate lessees have initial five or ten year terms with provisions for two five year
renewal terms.

*Transfer of Notes Receivable to NHI*

Effective December 31, 2002, we transferred three mortgage notes receivable secured by three long-term care facilities in Florida with total principal balances outstanding and a total carrying amount of
$15,717,000 ($15,473,000 at March 31, 2003) to NHI.  We received cash from NHI equal to our carrying
amount.  The transfer agreement with NHI includes provisions that allow us the ability to repurchase the
transferred notes after July 1, 2003 at a price equal to the outstanding principal and interest balance.  The
agreement also provides that, beginning January 2, 2004, NHI may put the notes back to us at a price equal
to the outstanding principal and interest balance.  As the result of the repurchase and put options, consistent
with the provisions of Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 140), we account for the transfer
of notes receivable to NHI as a borrowing from NHI rather than as a sale of the notes.  We continue to
recognize the notes receivable on our consolidated balance sheet as of March 31, 2003, and we continue to
recognize interest income on the notes.  Additionally, we have recognized an obligation to NHI on our
consolidated balance sheet as of March 31, 2003 and have recognized interest expense on such obligation.
*FCC Notes*

Of the $64,886,000 of mortgage and other notes receivable, $44,616,000 is due from Florida
Convalescent Centers, Inc. (FCC) of Sarasota, Florida.  The FCC notes bear interest at 10.25% and
substantially all of the notes mature October 31, 2004. The FCC notes may be prepaid without penalty.  If
prepayment occurs, we will apply some or all of the proceeds against our bank debt.  If not so used, we will
attempt to reinvest any amounts prepaid. Our existing term loan requires a portion of the prepayments to be
used to reduce bank debt. In the event that we use any prepayments to pay down existing debt, a reduction
of our cash flow will result.  However, no dividend reductions are expected in the near future.

Effective July 31, 1999, the FCC centers were leased to Integrated Health Systems, Inc. (IHS), which
filed for bankruptcy protection on February 2, 2000.  Pursuant to court order, the IHS lease was terminated
and the FCC centers re-leased to Schwartzberg Associates, a private multi-state long-term care company,
during the second quarter of 2002.  The ability of FCC to service the mortgage notes held by us is dependent
on Schwartzberg Associates' ability to make its lease payments to FCC.  Our payments from FCC are current
as of March 31, 2003.

Approximately $22,963,000 of our notes receivable from FCC are secured by second mortgages on
eight Florida nursing homes.  The first mortgage notes on these eight facilities total approximately
$18,705,000 at December 31, 2002, are tax exempt and are additionally secured with letters of credit issued
by Norwest Bank Minnesota N.A.  Accordingly, Norwest Bank currently holds a first mortgage that is senior
to our second mortgage on these eight Florida nursing homes.

*HSMI Sale*

Effective January 1, 2001, we sold all of the real estate and equipment of the three long-term health
care centers under lease to Health Services Management of Indiana, LLC (HSMI) to HSMI.  Consideration
for the sale and assumption of the $1,630,000 first mortgage and the properties is in the form of new
mortgage notes in the total amount of $12,029,000.  We account for this transaction under the deposit method
in accordance with the provisions of Statement of Financial Accounting Standards No. 66, "Accounting for
Sales of Real Estate", (SFAS 66).  Consistent with the deposit method, we have not recorded the sale of the
assets and continue to record depreciation expense each period. Any cash received from the buyer (which
since the sale totals $2,197,000 as of March 31, 2003) is reported as deposit on real estate properties sold
until the down payment and continuing investment criteria of SFAS 66 are met, at which time we will
account for the sale under the full accrual method.

*Sources and Uses of Funds*

Our leasing and mortgage services generated net cash from operating activities during the three
months ended March 31, 2003 in the amount of $5,482,000 compared to $5,619,000 in the prior period.  Net
cash from operating activities generally includes net income plus non-cash expenses, such as depreciation
and amortization and provision for loan losses, if any, and working capital changes.  The decrease is due
primarily to increased net income after adding back the provision for realty and loan losses in the prior
period.

Cash flows provided by investing activities was comprised of net collections on mortgage notes
receivable of $676,000 during the three months ended March 31, 2003 compared to $1,308,000 in the prior
period.

Cash flows used in financing activities included payments on long-term debt of $245,000 ($938,000
last year), payments for dividends to stockholders of $3,182,000 ($3,182,000 last year), and payments for
cash distributions to partners of $404,000 ($404,000 last year).  A principal payment of $1,250,000 related
to our term loan was due and was made on the first day of the subsequent quarter.

*Dividends*

We intend to pay quarterly distributions to our stockholders in an amount at least sufficient to satisfy
the distribution requirements of a real estate investment trust.  Such requirements necessitate that at least
90% of our taxable income be distributed annually.  The primary source for distributions will be rental and
interest income we earn on the real property and mortgage notes receivable.

RESULTS OF OPERATIONS

*Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002*

Net income for the three months ended March 31, 2003 is $2,741,000 versus $2,137,000 for the same
period in 2002, an increase of 28.3%.  Diluted earnings per common share is 28 cents in the 2003 period,
compared to 22 cents in the 2002 period.

Total revenues for the three months ended March 31, 2003 decreased $131,000 to $6,046,000 from
$6,177,000 for the three months ended March 31, 2002.  Revenues from rental income increased $125,000
or 3.0% when compared to the same period in 2002.  Revenues from mortgage interest decreased $347,000
or 18.0% in 2003 as compared to the same period in 2002.

The increase in rental income is due to increased percentage rent.  Percentage rent is calculated at
3% of the amount by which gross revenues of each leased health care center in each quarter of each year after
1999 exceed the gross revenues of such health care facility in the applicable quarter of 1999.

Of the $347,000 decrease in mortgage interest income, approximately $275,000 is due to the
repayment in December 2002 of two mortgages receivable totaling $10,737,000.  Mortgage interest income
decreased also because of reductions in the principal of mortgage notes receivable due to regular monthly
amortization.

Investment interest and other income increased $90,000 due to dividends earned on investments
purchased in September, 2002.

Total expenses for the 2003 three month period decreased $812,000 or 21.6% to $2,958,000 from
$3,770,000 for the 2002 three month period.  Interest expense increased $177,000 or 20.3% in the 2003 three
month period as compared to the 2002 period.  Depreciation of real estate decreased $111,000 or 6.5%.  No
realty loss has been recognized this year compared to a $1,000,000  write-down of the real estate of our
Indiana properties in the 2002 period.  General and administrative costs increased $18,000 or 9.7%.

Interest expense increased due primarily to the recognition of interest expense on our $15,700,000
obligation to NHI, which started in December 2002, offset by reduced interest expense on the credit facility.
The reduced interest expense on the credit facility was caused by principal paydowns ($25 million) at the
end of 2002 offset by an increased rate effective January 1, 2003.

We have adopted the definition of Funds From Operations ("FFO") prescribed by the National
Association of Real Estate Investment Trusts ("NAREIT").  FFO is defined as net income (loss) applicable
to common stockholders (computed in accordance with generally accepted accounting principles "GAAP")
excluding gains (or losses) from sales of property, plus depreciation of real property and after investments
for unconsolidated entities in which a REIT holds an interest.  FFO should not be considered as an alternative
to net income or any other GAAP measurement of performance as an indicator of operating performance or
as an alternative to cash flows form operations, investing or financing activities as a measure of liquidity.
FFO is helpful in evaluating a real estate investment portfolio's overall performance considering the fact that
historical cost accounting implicitly assumes that the value of real estate assets diminishes predictably over
time.

The following table reconciles net income (loss) applicable to common stockholders to funds from
(to) operations applicable to common stockholders:



|                                                              | Three Months Ended
|------------------------------------------------------------- | ------------------
|                                                              | March 31          
|                                                              | 2003              
|                                                              |                   
|Income before minority interests in consolidated subsidiaries | $  3,088          
|Adjustments:                                                  |                   
|Real estate depreciation                                      | 1,590             
|Impairment losses related to depreciable property             | ---               
|Adjustment for minority interest - affiliates                 | (527)             
|Funds from operations                                         | $  4,151          
|                                                              |                   
|Weighted average shares:                                      |                   
|Basic                                                         | 9,570,323         
|Diluted                                                       | 9,733,252         

FUTURE RENTAL AND MORTGAGE INTEREST INCOME UNCERTAINTIES

Our rental and mortgage interest income revenues are believed by management to be secure.
However, the majority of the income of our lessees and borrowers is derived from the lessees' participation
in the Medicare and Medicaid programs.  Adverse changes in these programs or the inability of our lessees
and borrowers to participate in these programs would have a material adverse impact on the financial
position, results of operations and cash flows of our lessees and borrowers and their resultant ability to
service their obligations to us.

None of our lessees or borrowers are in bankruptcy, but the facilities that secure the FCC Notes were
initially leased by FCC to Integrated Health Systems, Inc. (IHS), which filed for bankruptcy protection
February 2, 2000. By court order, the lease was terminated in 2002.  FCC immediately re-leased the
properties to Schwartzberg Associates, a private, multi-state long-term care company.  The ability of FCC
to service the mortgage notes held by us is initially dependent on Schwartzberg Associates' ability to make
its lease payments to FCC or, in the absence of lease payments, FCC's ability to operate or re-lease these
facilities.  All FCC note payments are current as of March 31, 2003.

INCOME TAXES

We intend at all times to qualify as a REIT under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended. Therefore, we will not be subject to federal income tax provided we distribute
at least 90% of our annual REIT taxable income to our stockholders and meet other requirements to continue
to qualify as a REIT. Accordingly, no provision for federal income taxes has been made in the consolidated
financial statements. Our failure to continue to qualify under the applicable REIT qualification rules and
regulations would have a material adverse impact on our financial position, results of operations and cash
flows.

IMPACT OF INFLATION

Inflation may affect us in the future by changing the underlying value of our real estate or by
impacting our cost of financing operations.

Our revenues are primarily from long-term investments.  Our leases with NHC require increases in
rent income based on increases in the revenues of the leased facilities.

FORWARD-LOOKING STATEMENTS

References throughout this document to the Company, "we" or "us" include National Health Realty,
Inc. and its subsidiaries.  In accordance with the Securities and Exchange Commission's "Plain English"
guidelines, this Quarterly Report on Form 10-Q has been written in the first person.  In this document, the
words "we", "our", "ours" and "us" refer only to National Health Realty, Inc. and its subsidiaries and not any
other person.

This Quarterly Report on Form 10-Q and other information we provide from time to time, contains
certain "forward-looking" statements as that term is defined by the Private Securities Litigation Reform Act
of 1995.  All statements regarding our expected future financial position, results of operations, cash flows,
funds from operations, continued performance improvements, ability to service and refinance our debt
obligations, ability to finance growth opportunities, and similar statements including, without limitations,
those containing words such as "believes", anticipates", "expects", "intends", "estimates", "plans", and other
similar expressions are forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties that may cause our
actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements as a result of, but not limited to, the following factors:

- national and local economic conditions, including their effect on the availability and cost of labor,
utilities and materials;
- the effect of government regulations and changes in regulations governing the healthcare industry,
including compliance with such regulations by us and our borrowers and/or lessees;
- changes in Medicare and Medicaid payment levels and methodologies and the application of such
methodologies by the government and its fiscal intermediaries;
- the ability to pay when due or refinance certain debt obligations maturing within the next nine
months;
- the competitive environment in which we operate;

See the notes to the quarterly financial statement, and "Item 1.  Business" as is found in our 2002
Annual Report on Form 10-K for a discussion of various governmental regulations and other operating
factors relating to the healthcare industry and the risk factors inherent in them.  The Annual Report and Form
10-Q's are available on our web site at www.nationalhealthrealty.com.  You should carefully consider those
risks before making any investment decisions in the Company.  These risks and uncertainties are not the only
ones facing the Company.  There may be additional risks that we do not presently know of or that we
currently deem immaterial.  If any of the risks actually occur, our business, financial condition or results of
operations could be materially adversely affected.  In that case, the trading price of our Common Stock could
decline, and you may lose all or part of your investment.  Given these risks and uncertainties, we can give
no assurances that these forward-looking statements will, in fact, transpire and, therefore, caution investors
not to place undue reliance on them.

******Item 3.	Quantitative and Qualitative Information About Market Risk**

INTEREST RATE RISK

Our cash and cash equivalent consist of highly liquid investments with a maturity of less than three
months.  All of our mortgage and other notes receivable bear interest at fixed interest rates.  As a result of
the short-term nature of our cash instruments and because the interest rates on our investments in notes
receivable are fixed, a hypothetical 10% change in interest rates would have no impact on our future earnings
and cash flows related to these instruments.

As of March 31, 2003, $63,885,000 of our long-term debt bears interest at floating interest rates.
Because the interest rates of these instruments are variable, a hypothetical 10% increase in interest rates
would result in additional annual interest expense of approximately $288,000 and likewise, a reduction in
interest rates would result in annual interest expense declining by approximately $288,000.  A hypothetical
10% change in interest rates would not have a material impact on the fair values of these instruments.

The remaining $15,358,000 of our long-term debt bears interest at fixed rates.  Because the interest
rates of these instruments are fixed, a hypothetical 10% change in interest rates would have no impact on
our future earnings and cash flows related to these instruments.

We currently do not use any derivative instruments to hedge our interest rate expense or for trading
purposes. The use of such instruments would be subject to strict approvals by our senior officers.  Therefore,
our exposure related to such derivative instruments is not material to our financial position, results of
operations or cash flows.

**Item 4.  Controls and Procedures**

As of March 31, 2003, an evaluation was performed under the supervision and with the participation
of the Company's management, including the Chief Executive Officer ("CEO") and Principal Accounting
Officer ("PAO"), of the effectiveness of the design and operation of the Company's disclosure controls and
procedures.  Based on that evaluation, the Company's management, including the CEO and PAO, concluded
that the Company's disclosure controls and procedures were effective as of March 31, 2003.  There have
been no significant changes in the Company's internal controls or in other factors that could significantly
affect internal controls subsequent to March 31, 2003.

**PART II.  OTHER INFORMATION**

Item 1.	Legal Proceedings.  None

Item 2.	Changes in Securities.  Not applicable

Item 3.	Defaults Upon Senior Securities.  None

Item 4.	Submission of Matters to a Vote of Security Holders.

(a)	The annual meeting of the shareholders was held on April 24, 2003.

(b)	Matters voted upon at the meeting are as follows:

Election of Robert G. Adams and Olin O. Williams to serve as directors for terms of three years or
until their successors have been fully elected and qualified and to elect Mr. Joseph M. Swanson to
complete the unexpired term of Dr. J. K. Twilla.  Other directors who terms of office continue are
W. Andrew Adams, Mr. Ernest G. Burgess, III, and Mr. Richard F. LaRoche, Jr.

|**Nominee**       | **Voting For** | **Withholding Authority** | **Percent For**
|----------------- | -------------- | ------------------------- | ---------------
|Robert G. Adams   | 7,866,560      | 936,074                   | 82.2           
|Olin O. Williams  | 8,779,940      | 22,694                    | 91.7           
|Joseph M. Swanson | 8,732,140      | 70,494                    | 91.2           

Item 5.	Other Information.  None

Item 6.	Exhibits and Reports on Form 8-K.

(a)	List of exhibits

|Exhibit No. | Description                            
|----------- | ---------------------------------------
|31          | Rule 13a-14(a)/15d-14(a) Certifications
|            | 302 Certification of W. Andrew Adams   
|            | 302 Certification of Donald K. Daniel  
|            |                                        
|99          | Additional Exhibits                    
|            | 906 Certification of W. Andrew Adams   
|            | 906 Certification of Donald K. Daniel  



(b)	Reports on Form 8-K - Form 8-K filed on April 24, 2003.  ****

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.

|                 | NATIONAL HEALTH REALTY, INC.
|---------------- | ----------------------------
|                 | (Registrant)                
|                
|                
|                
|Date May 7, 2003 | /s/ W. Andrew Adams         
|                 | W. Andrew Adams             
|                 | Chief Executive Officer     
|                
|                
|                
|Date May 7, 2003 | /s/ Donald K. Daniel        
|                 | Donald K. Daniel            
|                 | Principal Accounting Officer

**Exhibit 31**

**CERTIFICATION**

I, W. Andrew Adams, certify that:

1.	I have reviewed this annual report on Form 10-Q of National Health Realty, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information included in this
quarterly report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.	The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:

a.	designed such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this quarterly report is
being prepared;

b.	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;

5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation,
to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent function);

a.	all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and report financial
data and have identified for the registrant's auditors any material weaknesses in internal
controls; and

b.	any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant's internal controls; and

6.	The registrant's other certifying officers and I have indicated in this quarterly report whether there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|Date: May 7, 2003
|-----------------
|                 
|                 
|                 
|                 

**CERTIFICATION**

I, Donald K. Daniel, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of National Health Realty, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information included in this
quarterly report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.	The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:

a.	designed such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this quarterly report is
being prepared;

b.	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;

5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation,
to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent function);

a.	all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and report financial
data and have identified for the registrant's auditors any material weaknesses in internal
controls; and

b.	any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant's internal controls; and

6.	The registrant's other certifying officers and I have indicated in this quarterly report whether there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|Date: May 7, 2003
|-----------------
|                 
|                 
|                 
|                 

**Exhibit 99**

|******Certification of Quarterly Report on Form 10-Q**
|------------------------------------------------------
|**of National Health Realty, Inc.**                   
|**For The Quarter Ended March 31, 2003**              

The undersigned hereby certify, pursuant to 18 U.S.C. Section 906 of the Sarbanes-Oxley Act of
2002, that, to the undersigned's best knowledge and belief, the Quarterly Report on Form 10-Q for National
Health Realty, Inc. ("Issuer") for the period ending March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"):

|(a)                                                                        | fully complies with the requirements of section 13(a) or 15(d) of the   
|-------------------------------------------------------------------------- | ------------------------------------------------------------------------
|Securities Exchange Act of 1934; and                                      
|                                                                          
|(b)                                                                        | the information contained in the Report fairly presents, in all material
|respects, the financial condition and results of operations of the Issuer.
|                                                                          

This Certification accompanies the Quarterly Report on Form 10-Q of the Issuer for the quarterly
period ended March 31, 2003.

This Certification is executed as of May 7, 2003.

| | /s/ W. Andrew Adams         
| | ----------------------------
| | W. Andrew Adams             
| | Chief Executive Officer     
|
|
| | /s/ Donald K. Daniel        
| | Donald K. Daniel            
| | Principal Accounting Officer

A signed original of this written statement required by Section 906 has been provided to National Health
Realty, Inc. and will be retained by National Health Realty, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.