National Health Investors Inc · 10-K405 · For 12/31/96

Filed On 3/6/97   ·   SEC File 1-10822   ·   Accession Number 877860-97-16

Annual Report -- [X] Reg. S-K Item 405   ·   Form 10-K
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 1: 10-K405     Annual Report -- [X] Reg. S-K Item 405                80±   359K 
 2: EX-27       Financial Data Schedule                                1      6K 

10-K405   ·   Annual Report -- [X] Reg. S-K Item 405
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________________________________________________________________________      

SECURITIES AND EXCHANGE COMMISSION      
Washington, D.C. 20549      

FORM 10-K       
(Mark One)                                                                      
[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934                                    
For the fiscal year ended December 31, 1996             
OR      
[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE       
SECURITIES EXCHANGE ACT OF 1934                         
For the transition period from _______ to _________     
Commission file number 33-41863       
NATIONAL HEALTH INVESTORS, INC.       
(Exact name of registrant as specified in its charter)      
         Maryland                                   62-1470956
  (State or other jurisdiction                      (I.R.S. Employer
of incorporation or organization)            Identification Number)           

100 Vine Street, Suite 1202, Murfreesboro, Tennessee 37130      
(Address of principal executive offices)      
(Zip Code)      

(615) 890-9100    
(Company's telephone number, including area code)                               
Securities registered pursuant to Section 12(b) of the Act:       
Title of each Class                      Name of each exchange        
                                 on which registered
Shares of Common Stock                New York Stock Exchange     
Shares of Preferred Convertible Stock New York Stock Exchange     
Senior Subordinated Convertible Debentures                        
Due 2006 (10%)                        New York Stock Exchange     
Senior Subordinated Convertible Debentures                        
Due 1998 (7-3/8%)                     New York Stock Exchange     
Convertible Subordinated Debentures Due                           
2001 (7-3/4%)                         New York Stock Exchange     
Convertible Subordinated Debentures Due                           
2006 (7%)                             New York Stock Exchange     

Securities registered pursuant to Section 12(g) of      
the Act       
Same      

Indicate by check mark whether the registrant (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 (or for such shorter period that the registrant was     
required to file such reports), and (2) has been subject to such filing require-
ment for the past 90 days.  Yes   X      No _____                               

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405  
of Regulation S-K is not contained herein, and will not be contained, to the    
best of registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-K or any amendment to     
this Form 10-K.  [X]                                                            

The aggregate market value of voting stock held by nonaffiliates of the regis-  
trant was $818,675,914 as of January 27, 1997. The number of shares of Common   
Stock outstanding as of January 27, 1997 was 23,633,201.                        

PAGE 1 OF 75 PAGES      
Exhibit Index Page 42       

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PART I                

ITEM 1.   BUSINESS                                                              

GENERAL                                                                         

The Company is a real estate investment trust ("REIT") which
invests in income producing health care properties primarily in                 
the long-term care industry.  As of December 31, 1996, the                      
Company had interests in net real estate owned by it, mortgage                  
investments and REMIC investments totaling approximately $740                   
million.  The Company's strategy is to provide current income for               
distribution to stockholders through investments in health care                 
related facilities, including long-term care facilities, acute                  
care hospitals, medical office buildings, retirement centers and                
assisted living facilities, all of which are collectively                       
referred to herein as "Health Care Facilities".  The Company                    
intends to implement this strategy by acquiring additional                      
properties and making additional mortgage loans nationwide,                     
predominately in the long-term care industry.                                   

As of December 31, 1996, the Company had approximately      
$740.0 million in investments in 249 health care facilities                     
located in 25 states consisting of 204 long-term care facilities,               
three acute care hospitals, nine medical office buildings, eight                
assisted living facilities, eight retirement centers and 17                     
residential projects for the developmentally disabled.  These                   
investments consist of approximately $519.2 million aggregate                   
principal amount of loans to 47 borrowers and $184.3 million of                 
purchase leaseback agreements with five lessees and $36.6 million               
invested in REMIC pass through certificates.  Of these 249                      
facilities, 43 are leased to NHC and nine additional facilities                 
are managed by NHC.  Consistent with its strategy of                            
diversification, the Company has reduced the portion of its                     
portfolio operated by NHC  from 100.0% of total assets on October               
17, 1991, to 19% of total assets on December 31, 1996.                          

At December 31, 1996, NHI was committed, subject to due     
diligence and financial performance goals, to fund approximately                
$106.0 million in health care real estate projects of which                     
amount approximately $66.1 million is expected to be funded                     
within the next 12 months.  The commitments include mortgage                    
loans for five long-term health care centers, two medical office                
buildings, one retirement center and 13 assisted living centers                 
all at rates ranging from 10% to 12%.  Draws on the $18.6 million               
commitment are limited to $3.7 million annually.  Also included                 
in the $106.0 million of commitments is a $18.6 million                         
commitment on a loan secured by first mortgages on 43 long-term                 
care centers.                                                                   

In addition to the above commitments, NHI has entered into  
agreements to loan up to $18.9 million in 1997 in connection with               
the early purchase of loans.                                                    

The Company commenced operations on October 17, 1991 with   
approximately $121.8 million in net assets obtained when it                     
acquired 40 skilled long-term care facilities and three                         
retirement centers and four first mortgage notes from National                  
HealthCare L.P. ("NHC") in exchange for 7,306,570 shares of the                 
Company's Common Stock.  Concurrently, the Company assumed                      
mortgage indebtedness and certain other obligations of NHC                      
related to the acquired properties.  The 43 properties were then                
leased to NHC. NHC is a publicly traded master limited                          
partnership which at December 31, 1996 operated 100 long-term                   
care facilities with a total of 12,882 licensed beds.  Included                 
within these centers and beds are eight assisted care units (225                
beds), nine Alzheimer's units (226 beds) and eight sub-acute                    
units (255 beds).  NHC also operates four retirement centers with               
a total of 387 units, two freestanding assisted living facilities               
with a total of 152 units and 33 home health care programs.  All                
NHC operations are in the southeastern United States.                           

Since the Company commenced operations, NHC has provided    
advisory services pursuant to an Advisory, Administrative                       
Services and Facilities Agreement (the "Advisory Agreement").  In               
addition, the Company and NHC have certain other relationships.                 
See "Certain Relationships and Related Transactions."                           

Unless the context indicates otherwise, references herein to
the Company include all of the Company's subsidiaries.                          

TYPES OF HEALTH CARE FACILITIES                                                 

LONG-TERM CARE FACILITIES.  As of December 31, 1996, the    
Company owned and leased 43 licensed long-term care facilities,                 
40 of which were operated by NHC.  It also had outstanding first                
mortgage loans on 161 additional licensed long-term care                        
facilities.  All of these facilities provide some combination of                
skilled and intermediate nursing and rehabilitative care,                       
including speech, physical and occupational therapy.  The                       
operators of the long-term care facilities receive payment from a               
combination of private pay sources and government programs such                 
as Medicaid and Medicare.  Long-term care facilities are required               
to obtain state licenses and are highly regulated at the federal,               
state and local level.  Most long-term care facilities must                     
obtain certificates of need from the state before opening or                    
expanding such facilities.                                                      

ACUTE AND LONG TERM CARE HOSPITALS.  As of December 31,     
1996, the Company owned and leased one acute care hospital and                  
had outstanding first mortgage loans on one additional operating                
acute care hospital and one long term care hospital.  Acute care                
hospitals provide a wide range of inpatient and outpatient                      
services and are subject to extensive federal, state and local                  
legislation and regulation.  Long-term care hospitals provide                   
specialty care services for chronic care patients, whose average                
length of stay must exceed twenty-five days.  Acute and long term               
care hospitals undergo periodic inspections regarding standards                 
of medical care, equipment and hygiene as a condition of                        
licensure.  Services provided by acute and long term care                       
hospitals are generally paid for by a combination of private pay                
sources and governmental programs.                                              

MEDICAL OFFICE BUILDINGS.  As of December 31, 1996, the     
Company owned and leased five medical office buildings.  In                     
addition, the Company had first mortgage loans on four medical                  
office buildings, one of which is undergoing a significant                      
expansion.  Medical office buildings are specifically configured                
office buildings whose tenants are primarily physicians and other               
medical practitioners.  Medical office buildings differ from                    
conventional office buildings due to the special requirements of                
the tenants and their patients.  Each of the Company's owned                    
medical office buildings is leased to one lessee, and is                        
physically attached to an acute care hospital.  The lessee then                 
leases individual office space to the physicians or other medical               
practitioners.  The lessee is responsible to the Company for the                
lease obligations of the entire building, regardless of its                     
ability to lease the individual office space.                                   

ASSISTED LIVING FACILITIES.  The Company owns four assisted 
living facilities leased to a subsidiary of Marriott                            
International and has first mortgages on four additional assisted               
living projects.  Assisted living unit facilities are free                      
standing facilities or facilities which are attached to long term               
care facilities or retirement facilities and provide basic room                 
and board functions for the elderly.  Some assisted living                      
projects include licensed long term care (nursing home) beds.                   
On-site staff are normally available to assist in minor medical                 
needs on an as needed basis.  Certificates of need are normally                 
not necessary to build these projects.                                          

RETIREMENT CENTERS.  The Company owns three retirement      
centers, all of which are leased to NHC, and has first mortgages                
on five others.  Retirement centers offer specially designed                    
residential units for the active and ambulatory elderly and                     
provide various ancillary services for their residents including                
restaurants, activity rooms and social areas.  Charges for                      
services are paid from private sources without assistance from                  
government programs.  Retirement centers may be licensed and                    
regulated in some states, but do not require the issuance of a                  
certificate of need such as is normally required for long-term                  
care facilities.                                                                

RESIDENCES FOR THE DEVELOPMENTALLY DISABLED.  As of December
31, 1996, the Company had outstanding first mortgage notes on 17                
residences for the developmentally disabled.  Residences for the                
developmentally disabled are generally small home-like                          
environments which accommodate six mentally and developmentally                 
disabled persons.  These persons obtain custodial care which                    
includes food, lodging, education and transportation services.                  
These community based services are replacing the large state                    
institutions which have historically provided care to the                       
developmentally disabled.  Services to the developmentally                      
disabled are primarily paid for by state Medicaid programs.                     

NATURE OF INVESTMENTS                                                           

The Company's investments are typically structured as either
purchase leaseback transactions or mortgage loans.  The Company                 
also provides construction loans for facilities for which it has                
already committed to provide long-term financing or which agree                 
to enter into a lease with the Company upon completion of the                   
construction.  The capitalization rates of the Company's leases                 
and the interest rates on the mortgage loans and construction                   
loans have generally ranged between 10% and 12% per annum.  For                 
transactions closed in 1996, rates were slightly lower than 1995                
and generally ranged from 10.25% to 11%.  The Company charges a                 
commitment fee of 1% based on the purchase price of the property                
of a purchase leaseback or the total principal loan amount of a                 
mortgage loan.  In instances where construction financing has                   
also been supplied, there is generally an additional 1%                         
commitment fee for the construction financing.  The Company                     
believes its lease terms, mortgage loan and construction loan                   
terms are competitive in the market place.  All of the Health                   
Care Facilities are currently performing under their mortgage                   
loans or leases and the Company has no reason to believe that any               
of the Health Care Facilities will not be able to perform the                   
obligations under the mortgage loans or leases in the future.                   
Typical characteristics of these transactions are as follows:                   

MORTGAGE LOANS.  In general, the term of the Company's      
mortgage loans is 10 years with the principal amortized over 20                 
to 25 years and a balloon payment due at the end of the 10 year                 
term.  All mortgage loans except two have an additional interest                
component which is based on the escalation of gross revenues at                 
the project level or fixed rate increases.  These escalators are                
between 2.5% and 5% of the increase in gross revenue over a base                
year for nursing homes (typically, the first year following the                 
close of the financing) and are negotiated on a project by                      
project basis.  Assisted living escalators are generally higher,                
(5 to 7%) while medical office buildings are lower (generally 2%                
or so).  The escalators, while not currently material to net                    
income, are expected to be more significant in future periods.                  
The Company generally requires that the interest rate on mortgage               
loans be reset five years from the date of the original loan at                 
the greater of the then 10-year United States Treasury Notes                    
yield plus 450 to 500 basis points or the then current interest                 
rate provided in the mortgage.  In certain of its mortgage loans,               
the Company has received an equity participation which allows the               
Company to share in a portion of any appreciation of the equity                 
value of the underlying property.  The Company does not expect                  
the equity participations to constitute a significant or frequent               
source of income.  Most mortgage loans have prepayment penalties                
starting at 10% during the first year and decreasing by 1% each                 
year thereafter.  In most cases, the owner of the property has                  
committed to make minimum annual capital improvements for the                   
purpose of maintenance or upgrading the facility.                               

In most circumstances, the Company will require some        
additional form of security and/or collateral beyond that                       
provided by the lien of the mortgage.  This additional security                 
or collateral may consist of some or all of the following: (a) a                
guaranty by the borrowers' parent, if any, affiliates or                        
individual principals; (b) an assignment of the leases and rents                
relating to the mortgaged property; (c) cross collateralization                 
among loans; (d) security interest in other real property; (e) an               
assignment of personal property including accounts receivable;                  
(f) letters of credit or certificates of deposit, and (g) other                 
intangibles.                                                                    

LEASES.  The Company's leases generally have an initial     
leasehold term of 10 to 14 years with one or more five year                     
renewal options.  The leases are "triple net leases" under which                
the tenant is responsible to pay all taxes, utilities, insurance                
premium costs, repairs and other charges relating to the                        
ownership and operation of the Health Care Facilities.  The                     
tenant is generally obligated at its expense to keep all                        
improvements and fixtures and other components of the Health Care               
Facilities covered by "all risk" insurance in an amount equal to                
at least the full replacement costs thereof and to maintain                     
specified minimal personal injury and property damage insurance,                
protecting the Company as well as the tenant at such Health Care                
Facility.  The leases also require the tenant to indemnify and                  
hold harmless the Company from all claims resulting from the use                
and occupancy of each Health Care Facility by the tenant and                    
related activities, as well as to indemnify the Company against                 
all costs related to any release, discovery, clean-up and removal               
of hazardous substances or materials on, or other environmental                 
responsibility with respect to, each Health Care Facility.                      

All of the Company's leases contain annual escalators in    
rent payments.  Revenue escalators for both long-term care                      
centers and acute care hospitals are typically between 3% and 5%                
of the revenue increase per annum.  Rent escalators on certain                  
medical office buildings generally range from 2% to 4% of the                   
prior year's rent or in certain instances are based on increases                
in the Consumer Price Index. The escalators, while not currently                
material to net income, are expected to become more significant                 
to future periods.  All of the acute care and medical office                    
building properties which the Company owns and leases give the                  
lessee an option to purchase the underlying property at the                     
greater of i) the Company's acquisition costs; ii) the then fair                
market value as established by independent appraisers or iii) the               
sum of the land costs, construction costs and any additional                    
capital improvements made to the property by the Company.  None                 
of the Company's other leases have options to purchase.  In                     
addition, the acute care and medical office building leases                     
contain a right of first refusal for the lessee if the Company                  
receives an offer to buy the underlying leased property.                        

Most of the obligations under the leases are guaranteed by  
the parent corporation of the lessee, if any, or affiliates or                  
individual principals of the lessee.  In some leases, the third                 
party operator will also guarantee some portion of the lease                    
obligations, usually for a fixed period such as six months or one               
year.  Some obligations are further backed by other collateral                  
such as machinery, equipment, furnishings and other personal                    
property.                                                                       

CONSTRUCTION LOANS.  The Company also provides construction 
loans that by their terms convert either into purchase leaseback                
transactions or mortgage loans upon the completion of the                       
construction of the facility.  Generally the interest rates on                  
the construction loans range from 10% to 11%.  The term of such                 
construction loans are for a period which commences upon the                    
closing of such loan and terminates upon the earlier of (a) the                 
completion of the construction of the applicable facility or (b)                
a specific date.  During the term of the construction loan, funds               
are usually advanced pursuant to draw requests made  by the                     
borrower in accordance with the terms and conditions of the loan.               
In addition to the security of the lien against the property, the               
Company will generally require additional security and collateral               
in the form of either payment and performance completion bonds or               
completion guarantees by the borrower's parent, affiliates of the               
borrower or one or more of the individuals who control the                      
borrower.                                                                       

COMPETITION                                                                     

The Company competes, primarily on the basis of price,      
knowledge of the industry, and flexibility of financing                         
structure, with real estate partnerships, other REITs and other                 
investors (including, but not limited to, banks and insurance                   
companies) in the acquisition, leasing and financing of health                  
care related entities.                                                          

The operators of the Health Care Facilities compete on a    
local and regional basis with operators of facilities that                      
provide comparable services.  Operators compete for patients                    
based on quality of care, reputation, physical appearance of                    
facilities, services offered, family preference, physicians,                    
staff and price.  They compete with independent operators as well               
as companies managing multiple facilities, some of which are                    
substantially larger and have greater resources than the                        
operators of the Health Care Facilities.  Some of these                         
facilities are operated for profit while others are owned by                    
governmental agencies or tax-exempt non-profit organizations.                   

OPERATORS                                                                       

The majority (by total assets) of the Health Care Facilities
are operated by third party management companies on behalf of the               
owner or lessee.  The balance of the Health Care Facilities are                 
operated by the owner or lessee.  The Health Care Facilities are                
primarily operated by publicly-owned companies (72% of the total                
assets of the Health Care Facilities) or multistate regional                    
health care entities (20% of total investments).  Generally, a                  
third party operator of a facility is not liable to the Company                 
under the mortgage or lease; however, the Company considers the                 
operator to be an important factor in determining the                           
creditworthiness of the investment and the Company generally has                
the right to approve any changes in operators. On some                          
investments, the third party operator of a facility guarantees at               
least a portion of the lease or mortgage.  Operators of the                     
Health Care Facilities include NHC, Integrated Health Services,                 
Inc., Marriott Senior Living Services, Columbia/HCA, Sun                        
Healthcare, Tenet Corporation, Horizon Healthcare Corporation,                  
Beverly Enterprises, Inc., IATROS Health Network, Inc., and                     
Community Health Systems.                                                       

INVESTMENT IN REMIC CERTIFICATES                                                

1993 TRANSACTIONS                                           

On November 9, 1993, the Company purchased $34.2 million    
principal amount of SC Commercial Mortgage Pass-Through                         
Certificates, Series 1993-1 (the Certificates), which qualify as                
a real estate mortgage investment conduit (REMIC).  The                         
Certificates consist of nine classes issued in the aggregate                    
principal amount of $172.9 million.  The Certificates represent                 
the entire beneficial ownership interest in a trust fund                        
consisting of a pool of forty-one mortgage loans generally                      
secured by a first lien on a single property that provides long-                
term care and/or assisted living care.  All loans bear a fixed                  
rate of interest, the weighted average of which is 9.308%.  The                 
Certificates were purchased in a private placement offering and                 
are not readily marketable or freely tradable.                                  

The Company's investment in the Certificates includes Class 
D and Class E Certificates which bear interest and the Class I                  
Certificates which have no principal amount and are not entitled                
to distributions of principal, but are entitled to certain                      
priority interest distributions.  The Class D and Class E                       
Certificates were issued with original issue discount.                          

The Class D Certificates were rated "BB" by Standard &      
Poor's Rating Group (S&P) and Fitch Investors Services (Fitch)                  
and the Class I Certificates were rated "AA" by Fitch.   (As a                  
policy S&P does not rate interest only certificates.)  The Class                
E Certificates were not rated.  Fitch's rating of the Class I                   
Certificates does not address the possibility that Class I                      
Certificate holders might suffer a lower than anticipated yield                 
or that if there is a rapid rate of principal payments (including               
both voluntary and involuntary prepayments), investors in such                  
Certificates could fail to recover their initial investments.                   

Distributions of interest and principal on the Class D and  
Class E Certificates are subordinated to distributions of                       
interest and principal with respect to the other classes of                     
Certificates (which aggregate $137.9 million in principal                       
amount).  Distributions of interest on the Class I certificates                 
are senior to (or, with respect to certain classes of                           
Certificates, pari passu to) distributions of principal and                     
interest of the other classes of Certificates.                                  

1995 TRANSACTIONS                                           

On December 28, 1995, the Company purchased $7,305,000 face 
amount (purchase price was $6,158,000) of SC Commercial Mortgage                
Pass Through Certificates, Series 1995-1 (the Certificates) which               
qualifies as a REMIC.  The Certificates consist of ten classes                  
issued in the aggregate principle amount of $140,258,000.  The                  
Certificates represent the entire beneficial ownership interest                 
in a trust fund consisting of a pool of 36 first mortgage loans                 
secured by a first lien on 38 properties that provide long term                 
and/or assisted living care.  All loans bear a fixed rate of                    
interest the weighted average of which is 10.47%.  The                          
Certificates were purchased in a private placement offering and                 
are not readily marketable or freely tradable.                                  

The Company's investment is in Certificate Class F which are
rated "B" by S & P and Fitch.  Distributions of interest and                    
principle on the Class F certificates are subordinated to                       
distributions of interest and principle with respect to the other               
classes of the Certificates totaling $132,953,000 in principle                  
amount.                                                                         

LITCHFIELD - INTEGRATED HEALTH SERVICES, INC. (IHS)                             

On August 31, 1994, the Company funded $150.0 million of a  
$176.0 million loan commitment to provide permanent financing to                
Litchfield Asset Management Corp. for 43 long-term care                         
facilities (41 nursing homes, two retirement centers) with a                    
total of approximately 5,430 beds located in Alabama, Colorado,                 
Florida, Georgia, Idaho, Kansas, Kentucky, Louisiana, North                     
Carolina, Tennessee, Texas and West Virginia (the "Litchfield                   
Facilities") and leased by a wholly-owned subsidiary of IHS.  The               
leases on the retirement centers have been assigned-with NHI's                  
consent-to a newly formed public company, Integrated Living                     
Communities.  IHS remains as a lease guarantor, however.  The                   
initial $150 million of the loan was used for the repayment of                  
existing debt and the buyout of certain limited partnership                     
interests in the Litchfield Facilities.  The remaining amount is                
available for subsequent advances in annual amounts equal to the                
smaller of three times the increase in the contribution margin                  
(as defined in the Loan Agreement) or $3.7 million.  The loan                   
bears interest at the rate of 10.75% on the initial draw and the                
greater of 10.75% or the 10-year Treasury Notes rate plus 500                   
basis points per annum on each subsequent draw.  The term of the                
loan is the earlier of twelve months prior to the lease                         
termination date or ten years, and the loan is amortized over 25                
years. The loan provides an annual payment escalator equal to the               
greater of 3% of the increase in gross revenue from the base                    
year, or the increase in the Consumer Price Index (CPI), with the               
period ended August 31, 1996 as the base year.  The escalator                   
will commence with the quarter beginning September 1, 1996.  The                
loan may not be prepaid for the first three years and has a                     
prepayment penalty of 4% until the second year prior to maturity,               
at which time the prepayment penalty is reduced to 2% until the                 
last year of the lease term at which time the prepayment penalty                
is eliminated.                                                                  

The leases on all 43 facilities are guaranteed by IHS.  The 
lessees are required to make an initial capital improvement of                  
$9.5 million, which was substantially funded by December 31,                    
1995, and has committed on an ongoing basis to spend at least                   
$300 per bed per year on capital improvements.  Each of the                     
leases was entered into as of August 31, 1994 and each has a                    
seven year term, which may individually be extended for                         
additional lease years for a minimum period of one (1) year and a               
maximum period of five (5) years, based upon the tenant's                       
exercise of its right to receive incentive fees pursuant to a                   
participation agreement.  Each lease is also renewable at the                   
tenant's option for one seven (7) year period and three                         
successive five (5) year periods thereafter.  The rent for the                  
first three (3) lease years is the amount equal to that                         
particular facility's debt service amount.  In addition to the                  
first mortgage lien on all 43 facilities, the loan is further                   
secured by the lease payments, a letter of credit representing                  
six months principal and interest, all equipment, personal                      
property, accounts, general intangibles, contract rights,                       
inventory and debt service reserve.  The Company has the right to               
approve any lessee, sublease or management company for any of the               
Litchfield Facilities.  During 1996 all operating covenants                     
improved to the point that IHS exercised its right to extend its                
lease for an additional year and increased the outstanding loan                 
by $3,700,000.  At December 31, 1996, the outstanding balance on                
the loan to IHS was $138.7 million and 19% of the Company's real                
estate assets were operated by IHS.                                             

MARRIOTT SENIOR LIVING                                                          

In August 1996, the Company purchased four existing assisted
living/nursing home complexes from Marriott International in a                  
$52 million transaction. The projects, which consist of 413                     
assisted living units and 99 nursing home beds are located in New               
Jersey, Florida, and Texas.  Marriott Senior Living Services, a                 
wholly owned subsidiary of Marriott International, in turn leased               
the facilities from the Company for an initial term of twenty                   
years with a fifteen year renewal option.  In addition to the                   
base lease rate, Marriott will pay an additional lease amount                   
annually based upon a factor of seven to nine percent of the                    
gross revenues of the projects.  Until the projects are                         
substantially occupied and producing a covenanted debt coverage                 
ratio, the parent company guarantees the lease payment.                         

NHC MASTER AGREEMENT TO LEASE                                                   

The Master Agreement to Lease (the "Master Agreement") with 
NHC regarding 40 nursing homes and three retirement centers, sets               
forth certain terms and conditions applicable to all leases                     
entered into by and between NHC and the Company (the "Leases").                 
The Leases are for an initial term expiring on December 31, 2001                
with two five year renewal options at the election of NHC which                 
allow for the renewal of the leases on an omnibus basis only.                   
During the initial term and the first renewal term (if                          
applicable), NHC is obligated to pay annual base rent for the                   
respective Health Care Facilities aggregating $15.2 million plus                
additional rent described below.  During the second renewal term,               
NHC is required to pay annual base rent based on the then fair                  
market rental of the property as negotiated at that time between                
NHC and the Company.  The Master Agreement also obligates NHC to                
pay as additional rent under each Lease all payments of interest                
and principal and other payments due under each mortgage to which               
the conveyance of the respective Health Care Facility to the                    
Company was subject or any refinancing of mortgage debt that                    
matures or is required to be paid in its entirety during the term               
of the Lease.  In addition, in each year after 1992 (the first                  
full calendar year of the term of the Master Agreement), NHC is                 
obligated to pay percentage rent to the Company equal to 3% of                  
the amount by which gross revenues of each NHC leased Health Care               
Facility in such later year exceeds the gross revenues of such                  
Health Care Facility in 1992.  NHC paid $1.7 million as                         
percentage rent for 1996.                                                       

The Master Agreement is a "triple net lease", under which   
NHC is responsible to pay all taxes, utilities, insurance premium               
costs, repairs (including structural portions of the buildings,                 
constituting a part of the Health Care Facilities) and other                    
charges relating to the ownership and operation of the Health                   
Care Facilities.  NHC is obligated at its expense to keep all                   
improvements and fixtures and other components of the Health Care               
Facilities covered by "all risk" insurance in an amount equal to                
the full replacement costs thereof, insurance against boiler                    
explosion and similar insurance, flood insurance if the land                    
constituting the Health Care Facility is located within a                       
designated flood plain area and to maintain specified minimal                   
personal injury and property damage insurance, protecting the                   
Company as well as NHC at such Health Care Facility.  NHC is also               
obligated to indemnify and hold harmless the Company from all                   
claims resulting from the use and occupancy of each Health Care                 
Facility by NHC or persons claiming under NHC and related                       
activities, as well as to indemnify the Company against, all                    
costs related to any release, discovery, cleanup and removal of                 
hazardous substances or materials on, or other environmental                    
responsibility with respect to, each Health Care Facility leased                
by NHC.                                                                         

REPAYMENTS                                                                      

Although NHI structures its first mortgages with a declining
prepayment penalty commencing at 10%, the Company experienced                   
material loan prepayments in 1996.  Although approximately $96                  
million was prepaid, all proceeds have been reinvested in other                 
long term investments.                                                          

COMMITMENTS                                                                     

Excluding the Litchfield Facilities (See "Litchfield-       
Integrated Health Services, Inc."), the Company has received                    
commitment fees to make loans and to fund construction in                       
progress to third parties for $87.4 million.  Commitments include               
construction financings which have closed but which have not been               
fully funded as of December 31, 1996 and also investment amounts                
for which the Company has received a commitment fee but which                   
have not been funded as of December 31, 1996.                                   

The following table sets forth certain information regarding
the Company's commitments as of December 31, 1996.                              

No. of                                  
Facil-            Commitments           
Facility Type       ities     Current   Future     Total                        
                  (in thousands)
Long-term care        5       $22,437    $14,900  $ 37,337                      
Retirement Centers    1         2,242        ---     2,242                      
Medical office bldgs  2         7,450        ---     7,450                      
Assisted Living      13        34,004     25,000    59,004                      
--        ------     ------   ------- 
Commitments          21       $66,133    $39,900  $106,033                      

SOURCES OF REVENUES                                                             

GENERAL.   The Company's revenues are derived primarily from
mortgage interest income and rental income.  During 1996,                       
mortgage interest income equaled $62.5 million of which all                     
except $.4 million was from non-NHC borrowers.  Rental income                   
totaled $34.6 million, 82% of which was from properties operated                
by NHC.  The interest and rental payments are primarily derived                 
from the operations of the Health Care Facilities.  The source                  
and amount of revenues from such operations are determined by (i)               
the licensed bed or other capacity of the Health Care Facilities,               
(ii) the occupancy rate of the Health Care Facilities, (iii) the                
extent to which the services provided at each Health Care                       
Facility are utilized by the patients, (iv) the mix of private                  
pay, Medicare and Medicaid patients at the Health Care                          
Facilities, and (v) the rates paid by private paying patients and               
by the Medicare and Medicaid programs.                                          

Governmental and popular concerns regarding health care     
costs may result in significant reductions in payments to health                
care facilities, and there can be no assurance that future                      
payment rates for either governmental or private health care                    
plans will be sufficient to cover cost increases in providing                   
services to patients.  Any changes in reimbursement policies                    
which reduce reimbursement to levels that are insufficient to                   
cover the cost of providing patient care could adversely affect                 
revenues of the Company's health-related lessees and borrowers                  
and thereby adversely affect those lessees' and borrowers'                      
abilities to make their lease or debt payments to the Company.                  
Failure of the lessees or borrowers to make their lease or debt                 
payments would have a direct and material adverse impact on the                 
Company.                                                                        

MEDICARE AND MEDICAID.  A significant portion of the revenue
of the Company's lessees and borrowers is derived from                          
governmental-funded reimbursement programs, such as Medicare and                
Medicaid.                                                                       

Medicare is a federal health insurance program under the    
Social Security Act for individuals age 65 and over and certain                 
chronically disabled individuals.  In recent years, there have                  
been fundamental changes in the Medicare program which have                     
resulted in reduced levels of payment for a substantial portion                 
of health care services.                                                        

Medicaid is a joint federal and state program designed to   
provide medical assistance to "medically indigent persons".                     
These programs are operated by state agencies which adopt their                 
own medical reimbursement formula and standards, and rates and                  
covered services vary from state to state.  However, in many                    
instances, revenues from Medicaid programs are insufficient to                  
cover the actual costs incurred in providing care to those                      
patients.                                                                       

The Medicare and Medicaid programs are highly regulated and 
subject to frequent and substantial changes resulting from                      
legislation, adoption of rules and regulations, and                             
administrative and judicial interpretations of existing law.                    
Moreover, health care facilities have experienced increasing                    
pressures from private payors attempting to control health care                 
costs, and reimbursement from private payors has in many cases                  
effectively been reduced to levels approaching those of                         
government payors.                                                              

GOVERNMENTAL FUNDING OF MEDICARE AND MEDICAID.  At the time 
that this is written, neither the President nor the United States               
Congress have outlined or proposed amendments in Medicare and                   
Medicaid.                                                                       

Several important changes to the Medicare payment system    
were proposed during 1996, but have not yet been acted upon.                    
They include:                                                                   

(1)  A change to a prospective payment system (PPS).  A PPS 
   could eliminate the differential between the hospital
based skilled nursing facilities (SNFs) and       
    freestanding SNFs.  Because of inherently lower costs,
     freestanding SNFs should be able to continue to attract
higher acuity patients in this environment with a 
  potential loss of those patients from the acute care
side.                                             

(2)  Limitations on ancillary reimbursement will be facility
 specific which will be based upon 1994 "reasonable"
    costs standard and will be indexed by 1997.  Efficient
   operators that can improve outcomes for higher acuity
Medicare patients should be able to recover       
substantially all of their costs.                 

(3)  A freeze on routine cost payments and a reduction in   
    capital payments will place a premium on cost controls
and efficient delivery of services.  For Medicare 
   purposes, both the President's 1996 proposed bill and
the 1996 Congressional Budget Reconciliation Bill 
    propose shifting the actual administration of Medicaid
    and other Welfare programs from the Federal government
to the 50 states.  Although both bills contained  
language endeavoring to protect existing Medicaid 
programs, each state government would be assessing
their citizens' needs and allocating their limited
    resources accordingly.  Again, efficient operators and
     operators with a significant market share within states
    will probably be less effected with these changes than
single facility providers.                        

Although it is clear that there will be a reduction in the  
growth of governmental revenues for Medicare and Medicaid, NHI                  
and similar financial institutions believe that their position as               
either lessee or first mortgage holder is protected by sufficient               
revenue base so that it does not anticipate the creation of                     
problem or defaulting loans due to these cuts.                                  

LICENSURE AND CERTIFICATION.  The health care industry is   
highly regulated by federal, state and local law, and is directly               
affected by state and local licensing requirements, facility                    
inspections, state and federal reimbursement policies,                          
regulations concerning capital and other expenditures,                          
certification requirements, and other such laws, regulations and                
rules.  Sanctions for failure to comply with these regulations                  
and laws include (but are not limited to) loss of licensure,                    
fines, and loss of certification to participate in the Medicare                 
and Medicaid programs, as well as potential criminal penalties.                 
The failure of any lessee or borrower to comply with such laws,                 
requirements and regulations could affect its ability to operate                
the facility or facilities and could adversely affect such                      
lessee's or borrower's ability to make lease or debt payments to                
the Company.                                                                    

In the past several years, due to rising health care costs, 
there has been an increased emphasis on detecting and eliminating               
fraud and abuse in the Medicare and Medicaid programs.  Payment                 
of any consideration in exchange for referral of Medicare and                   
Medicaid patients is generally prohibited by federal statute,                   
which subjects violators to severe penalties, including exclusion               
from the Medicare and Medicaid programs, fines, and even prison                 
sentences.  In recent years, both federal and state governments                 
have significantly increased investigation and enforcement                      
activity to detect and punish wrongdoers.  In addition,                         
legislation has been adopted at both state and federal levels                   
which severely restricts the ability of physicians to refer                     
patients to entities in which they have a financial interest.                   

It is anticipated that the trend toward increased           
investigation and enforcement activity in the area of fraud and                 
abuse, as well as self-referral, will continue in future years.                 
Certain of the Company's investments are with lessees or                        
borrowers which are partially or wholly owned by physicians.  In                
the event that any lessee or borrower were to be found in                       
violation of laws regarding fraud and abuse or self-referral,                   
that lessee's or borrower's ability to operate the facility as a                
health care facility could be jeopardized, which could adversely                
affect the lessee's or borrower's ability to make lease or debt                 
payment to the Company and thereby adversely affect the Company.                

CERTIFICATES OF NEED.  Certain Health Care Facilities in    
which the Company invests are also generally subject to state                   
statutes which may require regulatory approval, in the form of a                
certificate of need ("CON") prior to the addition or construction               
of new beds, the addition of services or certain capital                        
expenditures.  CON requirements are not uniform throughout the                  
United States and are subject to change.  The Company cannot                    
predict the impact of regulatory changes with respect to CON's on               
the operations of the Company's lessees and mortgagees.                         

INVESTMENT POLICIES                                                             

The Company's investment objectives are (i) to provide      
current income for distribution to its stockholders through                     
investments primarily in health care related facilities, (ii) to                
provide the opportunity to realize capital growth resulting from                
appreciation, if any, in the residual value of its portfolio                    
properties, and (iii) to preserve and protect stockholders'                     
capital.  There can be no assurance that these objectives will be               
realized.  It is not the present intention of the Company to sell               
its properties and reinvest in other investments for the purpose                
of realizing gains resulting from the appreciation of value of                  
those properties; the Company, however, in the future would                     
consider selling properties in the event circumstances should                   
arise which would make a sale advisable or attractive.                          

The Company intends to seek further health care related     
investment opportunities and to provide lease or mortgage                       
financing for such investments with additional capital, possibly                
including debt, from public or private sources.  The Company                    
plans to continue its goal of maintaining a one to one ratio of                 
debt to shareholder's equity.  The Company will be competing with               
health care providers and investors, including other real estate                
investment trusts, for additional health care related                           
investments.  In evaluating potential investments, the Company                  
expects to consider such factors, as (i) the geographic area and                
type of property, (ii) the location, construction quality,                      
condition and design of the property, (iii) the current and                     
anticipated cash flow and its adequacy to meet operational needs                
and lease or mortgage obligations and to provide a competitive                  
market return on equity to the Company's investors, (iv) the                    
growth, tax and regulatory environments of the communities in                   
which the properties are located, (v) occupancy and demand for                  
similar health care facilities in the same or nearby communities,               
(vi) the quality, experience and creditworthiness of the                        
management operating the facilities located on the property; and                
(vii) the mix of private and government sponsored patients.                     
There can be no assurances that these intentions will be                        
realized.                                                                       

The Company will not, without the  prior approval of a      
majority of the Board of Directors, enter into any joint venture                
relationships with or acquire from or sell to any director,                     
officer, or employee of NHC or the Company, or any affiliate                    
thereof, as the case may be, any of the assets or other property                
of the Company.  The Company's Credit Agreements limit the amount               
of investment in any one borrower to 25% of the Company's assets,               
except for investments in NHC which is limited to 35% of the                    
Company's assets.  As of December 31, 1996, investments in NHC                  
totaled approximately 19% and investments to Litchfield totaled                 
approximately 19%.  The Company is unable to predict the extent                 
to which it will engage in activities with NHC or any other                     
operator within these limits.                                                   

The Board of Directors, without the approval of the         
stockholders, may alter the Company's investment policies if they               
determine that such a change is in the best interests of the                    
Company and its stockholders.  The methods of implementing the                  
Company's investment policies may vary as new investment and                    
financing techniques are developed or for other reasons.                        

The Company may incur additional indebtedness in the future 
to make investments in health care related facilities when it is                
advisable in the opinion of the Board of Directors.  The Company                
may negotiate other lines of credit, or arrange for other short                 
or long term borrowings from banks, NHC or otherwise.  The                      
Company has and may arrange for long term borrowings from                       
institutional investors or through public offerings.  The Company               
has invested and may in the future invest in properties subject                 
to existing loans or secured by mortgages, deeds of trust or                    
similar liens with favorable terms or REMIC investments.                        

ADVISORY AGREEMENT                                                              

The Company entered into the Advisory Agreement on October  
17, 1991 with NHC as "Advisor"  under which NHC provides                        
management and advisory services to the Company during the term                 
of the Advisory Agreement.  The Company believes the Advisory                   
Agreement benefits the Company by providing it access to NHC's                  
extensive experience in the ownership and management of long-term               
care facilities and retirement centers.  Under the Advisory                     
Agreement, the Company engaged NHC to use its best efforts (a) to               
present to the Company a continuing and suitable investment                     
program consistent with the investment policies of the Company                  
adopted by the Board of Directors from time to time; (b) to                     
manage the day-to-day affairs and operations of the Company; and                
(c) to provide administrative services and facilities appropriate               
for such management.  In performing its obligations under the                   
Advisory Agreement, NHC is subject to the supervision of and                    
policies established by the Company's Board of Directors.                       

The Advisory Agreement was initially for a stated term which
expired December 31, 1996.  The Agreement is now on a year to                   
year term.  Either party may terminate the Advisory Agreement at                
any time on 90 days notice, and the Company may terminate the                   
Advisory Agreement for cause at any time.  For its services under               
the Advisory Agreement, the Advisor is entitled to annual                       
compensation in a base amount of $1.6 million, payable in monthly               
installments of $135,417.  Under the Advisory Agreement, the                    
Company reimburses NHC for certain out of pocket expenses                       
including those incurred in connection with borrowed money,                     
taxes, fees to independent contractors, legal and accounting                    
services and stockholder distributions and communications.  For                 
1993 and later years the annual compensation is calculated on a                 
formula which is related to the increase in Funds from Operations               
per common share (as defined in the Advisory Agreement).  In                    
1996, the annual compensation under the Advisory Agreement was                  
$3.1 million.                                                                   

Pursuant to the Advisory Agreement, NHC manages all of the  
day-to-day affairs of the Company and provides all such services                
through its personnel.  The Advisory Agreement provides that                    
without regard to the amount of compensation received by NHC                    
under the Advisory Agreement, NHC shall pay all expenses in                     
performing its obligations including the employment expenses of                 
the officers and directors and personnel of NHC providing                       
services to the Company.  The Advisory Agreement further provides               
that the Company shall pay the expenses incurred with respect to                
and allocable to the prudent operation and business of the                      
Company including any fees, salaries, and other employment costs,               
taxes and expenses paid to directors, officers and employees of                 
the Company who are not also employees of NHC.  Currently, other                
than the directors who are not employees of NHC, the Company does               
not have any officers or employees who are not also employees of                
NHC.  The Company's two executive officers, Mr. Adams and Mr.                   
LaRoche are employees of NHC and all of their fees, salaries and                
employment costs are paid by NHC.                                               

In addition, although not specifically provided for in the  
Advisory Agreement, during 1993 the Company granted stock options               
to purchase a total of 100,000 shares of Common Stock for the                   
benefit of various NHC employees and outside directors of NHC who               
provided services to the Company.  An additional 100,000 shares                 
were granted as options to various NHC employees and outside                    
directors in 1995.  Additionally, the Company has implemented an                
option exercise loan guaranty program, the purpose of which is to               
facilitate Directors and key personnel exercising options to                    
purchase NHI common stock. Pursuant to Board of Directors'                      
resolution unanimously passed, each Director and Key Employee to                
whom options to purchase NHI common shares have been granted is                 
eligible to benefit from a Company guaranty on up to $100,000 per               
year of loans made from commercial banking institutions, the                    
proceeds of which are used to exercise NHI options.  The                        
guarantee is structured as follows:  Option holders must pledge                 
to NHI 125% of the loan amount in publicly traded stock as                      
additional collateral for the guarantee; the option holder must                 
personally guarantee the loan to the bank; the interest rate                    
charged by the bank and all expenses pertaining to the loan are                 
to be borne by the Director or Employee and the maximum                         
outstanding amount of loan guarantees is $5.0 million.                          
Furthermore, this facility is to have a one year term and be                    
renewable at the Board's discretion.  The table on page 41                      
indicates the current amount of loans outstanding by Directors of               
NHI individually and by all designated NHC employees collectively               
as of December 31, 1996.  The total outstanding as of December                  
31, 1996 is $1.9 million.                                                       

FEDERAL INCOME TAX                                                              

The Company believes that it has operated its 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 the                  
Company intends to continue to operate in such a manner, but no                 
assurance can be given that the Company will be able to qualify                 
at all times.  If the Company qualifies as a REIT, it will                      
generally not be subject to federal corporate income taxes on its               
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.                                                            

ITEM 2.   PROPERTIES                                                            

                                                                · Download Table
                         NHI PROPERTIES                       

LONG TERM CARE                                                

Center                             City                Beds   
                                                              
ALABAMA                                                       
Hanover House Nursing Center       Birmingham           80    
NHC HealthCare, Anniston           Anniston            151    
NHC HealthCare, Moulton            Moulton             136    

ARIZONA                                                       
The Arbors Health Care Center      Camp Verde          120    
Pueblo Notre Nursing               Show Low            100    
Rio Verde Health Care Center       Cottonwood          100    
Royal Sun West Care Center         Avondale            120    

COLORADO                                                      
Amberwood Court                    Denver               88    
Brookshire House                   Denver               79    
Brookside Inn                      Castle Rock         120    
   (under construction)                                       
Cheyenne Mountain Nursing Center   Colorado Springs    180    
Christopher House                  Wheat Ridge          75    
Mesa Manor Nursing Home            Grand Junction       98    
Pikes Peak Manor                   Colorado Springs    210    
Pueblo Manor Nursing Home          Pueblo              151    

FLORIDA                                                       
Alachua Nursing Home               Gainesville         120    
Bay St. Joseph Care Center         Port St. Joe        120    
Bear Creek Nursing Center          Hudson              120    
Brighton Gardens of Maitland       Maitland             39    
Brighton Gardens of W. Palm Beach  West Palm Beach      30    
Brooksville Nursing Manor          Brooksville         180    
Cypress Cove Care Center           New Port Richey     120    
Eustis Manor                       Eustis              138    
Fort Myers Care Center             Fort Myers          107    
Franco Nursing                     Miami               120    
Hampton Court Health Care Center   North Miami Beach   120    
Health Care Center at                                         
   Mercy Hospital                  Miami               120    
Heather Hill Nursing Home          Crystal River       120    
Heritage Park of Bradenton         Bradenton           120    
Huber Restorium                    St. Petersburg       96    
King David Center                  West Palm Beach     191    
Lake Park - Madison                Lake Park            79    
Lanier Manor                       Jacksonville        120    
Medic-Ayers Nursing Center         Trenton             120    
Metro-West Health Center           Ocoee               120    
   (under construction)                                       
Miracle Hill Nursing & Conval.     Tallahassee         120    
   (under construction)                                       
NHC HealthCare, Hudson             Hudson              180    
NHC HealthCare, Merritt Island     Merritt Island      120    
NHC HealthCare, Plant City         Plant City          171    
NHC HealthCare, Stuart             Stuart              106    
Oakview Nursing                    Williston           180    
Oaks of Kissimmee                  Kissimmee            59    
Orange Park Care Center            Orange Park         105    
Osceola Health Care Center         St. Cloud           120    
Palm Bay Care Center               Palm Bay            119    
Port Charlotte Care Center         Port Charlotte      164    
Royal Oak Nursing Center           Dade City           120    
Sebring Care Center                Sebring             104    
The Shores Nursing Center          Bradenton            21    
Wakulla Manor                      Crawfordville       120    
Winter Park Care Center            Winter Park         103    

GEORGIA                                                       
Ashton Woods                       Dekalb County       157    
Forest Lake Manor                  Augusta             100    
Heritage Convalescent Center       Atlanta             180    
Jennings Health Care Center        Augusta             100    
Meadowbrook Nursing Center         Tucker              100    
Moss Oaks Health Care Center       Pooler              122    
Rossville Convalescent Center      Rossville           112    
Shoreham Convalescent Center       Marietta            154    
West Lake Manor                    Augusta             100    

IDAHO                                                         
Capital Care Center                Boise               215    
Grangeville Care Center            Grangeville          64    
Sunny Ridge Care Center            Nampa               185    

KANSAS                                                        
Bethesda Nursing Center            Chanute              90    
Country Club Home                  Council Grove       100    
Great Bend Manor                   Great Bend          160    
Green Meadows Nursing Center       Haysville           150    
Hammond Holiday Home               Larned              100    
Northeast Nursing Center           Wichita             116    
Royal Terrace Nursing              Olathe              147    
Sedgwick Convalescent Center       Sedgwick             95    

KENTUCKY                                                      
Mayfair Manor Nursing Center       Lexington           100    
NHC HealthCare, Dawson Springs     Dawson Springs       80    
NHC HealthCare, Glasgow            Glasgow             206    
NHC HealthCare, Madisonville       Madisonville         94    

LOUISIANA                                                     
Centenary Heritage Manor           Shreveport          101    
East Haven Care Center             New Orleans         260    
Fountain View Nursing Home         Springhill          153    
Heritage Manor of Abbeville        Abbeville           120    
Heritage Manor of Alexandria       Alexandria           56    
Heritage Manor of Gonzales         Gonzales            124    
Heritage Manor of Kaplan           Kaplan              120    
Heritage Manor of Lafayette        Lafayette            60    
Heritage Manor of Many I           Many                128    
Heritage Manor of Many II          Many                 60    
Heritage Manor of Marrero          Marrero              60    
Heritage Manor of New Iberia North New Iberia          121    
Heritage Manor of New Iberia South New Iberia           80    
Heritage Manor of Shreveport       Shreveport           86    
Heritage Manor of Thibodaux        Thibodaux            58    
Heritage Manor of Vivian           Vivian               80    
Jackson Manor                      Jonesboro            84    
Meadowview Nursing Home            Minden              230    
Pierremont Heritage Manor          Shreveport          196    

MARYLAND                                                      
Windsor Ridge Nursing and                                     
   Rehabilitation Center           Rockville           120    

MISSOURI                                                      
Charleviox Nursing Center          St. Charles         142    
Clayton House Healthcare           Clayton             282    
Columbia House Healthcare          Columbia            141    
Florissant Nursing Center          Florissant          120    
Heritage Manor of Springfield      Springfield         102    
Hunter Acres Nursing Center        Sikeston            116    
Medicenter-Springfield             Springfield         168    
NHC HealthCare, Desloge            Desloge             120    
NHC HealthCare, Joplin             Joplin              126    
NHC HealthCare, Kennett            Kennett             160    
NHC HealthCare, Maryland Heights   St. Louis           220    
NHC HealthCare, St. Charles        St. Charles         120    
Oak View Living Center             Jefferson City      120    
Ozark Nursing Center               West Plains         120    
Spanish Lake Nursing Center        Florissant          120    
Tradition House Healthcare         Joplin               92    

NEW JERSEY                                                    
Brighton Gardens of Edison         Edison               30    

NORTH CAROLINA                                                
Hawthorne Nursing Center           Charlotte           142    

NEW HAMPSHIRE                                                 
The Courville at Nashua            Nashua              100    
Epsom Manor, Inc.                  Epsom               108    
Maple Leaf Health Care Center      Manchester          114    
Villa Crest, Inc.                  Manchester          165    

OHIO                                                          
The Riverside                      Dayton              200    
Wood Glen Nursing Center           Dayton              148    

PENNSYLVANIA                                                  
Briarcliff Pavilion for                                       
   Special Care                    N. Huntingdon       225    
Kade Nursing Home                  Canton Township     100    
Nipple Convalescent Center         Liverpool            37    

SOUTH CAROLINA                                                
Anne Maria Nursing Home            North Augusta       132    
NHC HealthCare, Anderson           Anderson            290    
NHC HealthCare, Greenwood          Greenwood           152    
NHC HealthCare, Laurens            Laurens             176    
Orangeburg Nursing Center          Orangeburg           88    

TENNESSEE                                                     
Donelson Healthcare Center         Nashville           124    
Fentress County Nursing Home       Jamestown           130    
Greenville West Health Care Center Greenville          144    
NHC HealthCare, Athens             Athens               96    
NHC HealthCare, Chattanooga        Chattanooga         212    
NHC HealthCare, Columbia           Columbia            120    
NHC HealthCare, Dickson            Dickson             217    
NHC HealthCare, Franklin           Franklin             84    
NHC HealthCare, Hendersonville     Hendersonville      107    
NHC HealthCare, Hillview           Columbia             98    
NHC HealthCare, Johnson City       Johnson City        179    
NHC HealthCare, Knoxville          Knoxville           152    
NHC HealthCare, Lewisburg          Lewisburg            95    
NHC HealthCare, McMinnville        McMinnville         142    
NHC HealthCare, Milan              Milan               129    
NHC HealthCare, Nashville          Nashville           133    
NHC HealthCare, Oakwood            Lewisburg            62    
NHC HealthCare, Pulaski            Pulaski              95    
NHC HealthCare, Scott              Lawrenceburg         62    
NHC HealthCare, Sequatchie         Dunlap               60    
NHC HealthCare, Smithville         Smithville           76    
NHC HealthCare, Somerville         Somerville           84    
NHC HealthCare, Sparta             Sparta              150    
NHC HealthCare, Springfield        Springfield         112    
Pickett County Nursing Home        Byrdstown            63    
Rivermont Convalescent and                                    
   Nursing Center                  South Pittsburg     165    
Standing Stone Nursing Home        Monterey            115    
Sycamore View Nursing Home         Memphis             130    

TEXAS                                                         
Bonham Nursing Center              Bonham               65    
Canterbury Villa of Falfurrias     Falfurrias           98    
Canterbury Villa of Kingsville     Kingsville          194    
Columbus Care Center               Columbus            134    
Denison Manor                      Mt. Vernon           71    
Heritage Manor of Iowa Park        Iowa Park            77    
Heritage Manor of Plainview        Plainview           109    
Midwestern Parkway Heritage Manor  Wichita Falls       120    
Shoreline Health Care Center       Taft                200    
Terrell Care Center                Terrell              94    
Terrell Convalescent Center        Terrell             129    
Terry Haven Nursing Center         Mt. Vernon           65    
Willis Convalescent Center         Willis              114    
Willow Bend Care Center            Mesquite            251    

VIRGINIA                                                      
Brian Center of Alleghany          Low Moor             60    
Brian Center of Bastian            Bastian              60    
Brian Center of Fincastle          Fincastle            60    
Maple Grove Health Care            Lebanon              60    
NHC HealthCare, Bristol            Bristol             120    
The Springs Nursing Center         Hot Springs          60    
Willow Creek Health Care Center    Midlothian          120    

WASHINGTON                                                    
Greenwood Park Care Center         Seattle             151    
Highline Care Center               Seattle              86    
Park Ridge Care Center             Seattle             128    
Park Rose Care Center              Tacoma              218    
Park West Care Center              Seattle             152    
Sehome Park Care Center            Bellingham          137    

WEST VIRGINIA                                                 
Jefferson Manor Nursing Home       Charlestown         126    

ACUTE CARE PROPERTIES                                         

KENTUCKY                                                      
Kentucky River Hospital            Jackson              55    

LOUISIANA                                                     
Doctors Hospital                   Metarie             138    
University Rehab Hospital          New Orleans         106    

MEDICAL OFFICE BUILDINGS                                      
                                                       Square 
Center                             City                Footage
------                             ----                -------
ARIZONA                                                       
North Valley Medical Center        Scottsdale          80,000 

FLORIDA                                                       
North Okaloosa                     Crestview           27,017 

KENTUCKY                                                      
Scott Hospital                     Georgetown          24,824 

LOUISIANA                                                     
Women's & Children's               Lafayette           30,000 

TENNESSEE                                                     
Murfreesboro Medical Clinic        Murfreesboro        77,801 
                                under construction     45,000 

TEXAS                                                         
Bellaire Medical Plaza             Bellaire            59,622 
Pasadena                           Pasadena            61,500 

UTAH                                                          
Pioneer Valley                     Salt Lake City      69,000 

WASHINGTON                                                    
Capital Medical Office Building    Olympia             67,152 

RETIREMENT CENTERS                                            

Center                             City                Beds   
------                             ----                ----   
COLORADO                                                      
Cheyenne Place Retirement Center   Colorado Springs    110    

FLORIDA                                                       
The Shores Nursing Center          Bradenton           270    

MISSOURI                                                      
Lake St. Charles Retirement Center St. Charles         168    

NEW HAMPSHIRE                                                 
Heartland Place                    Epsom                80    
Villas at Nashua                   Nashua                2    

TENNESSEE                                                     
Parkwood Retirement Center         Chattanooga          36    
Colonial Hill Retirement Center    Johnson City        132    

TEXAS                                                         
Remington Retirement Community     Corpus Christi       60    

ASSISTED LIVING AND                                           
DEVELOPMENTALLY DISABLED                                      

Center                             City                Beds   
------                             ----                ----   
FLORIDA                                                       
19th Street Group Home             Gainesville           6    
107th Place Group Home             Belleview             6    
Bessent Road Group Home            Starke                6    
Brighton Gardens of Maitland       Maitland            102    
Brighton Gardens of W. Palm Beach  West Palm Beach     104    
Coletta Drive Group Home           Orlando               6    
Frederick Avenue Group Home        Daytona Beach         6    
High Desert Court Group Home       Jacksonville          6    
McFarland Avenue Group Home        Lake City             6    
Naples Court Group Home            Jacksonville          6    
Plaza Oval Group Home              Casselberry           6    
Ruleme Apartments                  Eustis               31    
Rosewood Group Home                Ormond Beach          6    
Second Street Group Home           Ocala                 6    
Somerset on Lake Saunders          Tavares              54    
Suffridge Drive Group Home         Bonita Springs        6    
Tunis Street Group Home            Jacksonville          6    
Walnut Street Group Home           Starke                6    

GEORGIA                                                       
Shoreham Convalescent Center       Marietta             24    

NEW HAMPSHIRE                                                 
Aynsley Place, Inc.                Nashua               46    
Carlyle Place, Inc.                Bedford              40    

NEW JERSEY                                                    
Brighton Gardens of Edison         Edison               98    

TENNESSEE                                                     
717 Cheatam Street                 Springfield           8    
305 West Hillcrest Drive           Springfield           8    
307 West Hillcrest Drive           Springfield           8    

TEXAS                                                         
Brighton Gardens of Preston Road   Dallas              109    
Remington Retirement Community     Corpus Christi       30    
   (under construction)                                       

            REAL ESTATE MORTGAGE INVESTMENT CONDUITS          

20.0% participating interest       25 Properties       3,554  
 5.2% participating interest       36 Properties       4,784  

ITEM 3.   LEGAL PROCEEDINGS                                                     

The Company is not subject to any pending litigation.  The  
Health Care Facilities are subject to claims and suits in the                   
ordinary course of business.  The Company's lessees and                         
mortgagees have indemnified and will continue to indemnify the                  
Company against all liabilities arising from the operation of the               
Health Care Facilities, and will indemnify the Company against                  
environmental or title problems affecting the real estate                       
underlying such facilities.  While there are lawsuits pending                   
against certain of the owners and/or lessees of the  Health Care                
Facilities, management believes that the ultimate resolution of                 
all pending proceedings will have no material adverse effect on                 
the Company or its operations.                                                  

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                   

(a)  The Annual Meeting of the Shareholders was held on     
March 21, 1996.                                                                 

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

PROPOSAL NO. 1:  Election of W. Andrew Adams to serve as    
director for a term of three years or until his successor   
has been fully elected and qualified.  Other directors whose
terms of office continue are Mr. Ted Welch; Mr. Richard F.  
LaRoche, Jr., and Mr. Robert T. Webb.                       

                            % of Total
                            Outstanding Shares
For       Against   Abstain   Voting   Voting For 
16,812,890       -0-     39,022    81.59%    81.13%         

PROPOSAL NO. 2:  Election of Jack Tyrrell to serve as       
director for a term of three years or until his successor   
has been fully elected and qualified.  Other directors whose
terms of office continue are Mr. Ted Welch; Mr. Richard F.  
LaRoche, Jr.; and Mr. Robert T. Webb.                       

                            % of Total
                            Outstanding Shares
For       Against   Abstain   Voting    Voting For
16,814,849       -0-     37,063    81.59%      81.14%       

PROPOSAL NO. 3:     Ratify the appointment of Arthur        
Andersen LLP as the Company's independent accountant.       

                            % of Total
                            Outstanding Shares
For       Against   Abstain   Voting    Voting For
16,851,912     17,632    41,822    81.59%      81.31%       

PART II               

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                     
SHAREHOLDER MATTERS                                         

On October 16, 1996, the NHI Board of Directors, pursuant to
powers granted by NHI's charter, changed the limit on the                       
percentage of ownership which any person may have in the                        
outstanding common stock of NHI from a limit of 7.0% (as passed                 
on October 17, 1995) to a limit of 9.9%.  The limit on ownership                
of any other class of stock (including issues convertible into                  
common stock) remain at 9.9% of the outstanding stock.                          

In order to qualify for the beneficial tax treatment        
accorded to a REIT, the Company must make quarterly distributions               
to holders of its Common Stock equal on an annual basis to at                   
least 95% of the Company's REIT taxable income (excluding net                   
capital gains), as defined in the Code.  Cash available for                     
distribution to stockholders of the Company is primarily  derived               
from interest payments received on its mortgages and from rental                
payments received under the Company's leases.  All distributions                
will be made by the Company at the discretion of the Board of                   
Directors and will depend on the cash flow and earnings of the                  
Company, its financial condition, bank covenants contained in its               
financing documents and such other factors as the Board of                      
Directors deems relevant.  The Company's REIT taxable income is                 
calculated without reference to its cash flow.  Therefore, under                
certain circumstances, the Company may not have received cash                   
sufficient to pay its required distributions.                                   

COMMON STOCK MARKET PRICES AND DIVIDENDS                                        

The Company's common stock is traded on the New York Stock                      
Exchange under the symbol NHI.  The closing price for NHI stock                 
on Tuesday, February 21, 1997 was $38.625.  As of December 31,                  
1996, there were approximately 2,100 holders of record of shares                
and the Company estimates that as of such date there were in                    
addition in excess of 18,000 beneficial owners of the shares.                   

High and low stock prices and dividends for the last two years                  
were:                                                                           

                  1996                          1995
              ------------------------------------   -------------------------
                          Cash                          Cash
           Sales Price     Dividends     Sales Price     Dividends
Quarter Ended    High      Low     Declared    High      Low     Declared       
         ------    ------   --------  -------   -------   --------
March 31       $34.125   $31.750      .70    $26.500   $23.000     $.62         
June 30         34.500    30.500      .70     27.625    24.875      .62         
September 30    34.125    31.500      .70     30.375    26.500      .67         
December 31     38.000    33.000      .74     33.750    29.375      .70         

ITEM 6.   SELECTED FINANCIAL DATA                                               

The following table represents financial information with   
respect to the Company for the five years ended December 31,                    
1996.  This financial information has been derived from financial               
statements included elsewhere in this Form 10-K and should be                   
read in conjunction with those financial statements and                         
accompanying footnotes.                                                         

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                                                        · Enlarge/Download Table
                                    NATIONAL HEALTH INVESTORS, INC.                              
                                        SELECTED FINANCIAL DATA                                  
                           (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                      


Year Ended December 31            1996          1995           1994           1993        1992   
                                                                                                 
Net revenues                  $    99,429    $   87,924     $   70,850     $   49,552  $   39,369
Net income                         67,164        49,692         38,880         24,366      13,325
Net income per share                                                                             
  Primary                     $      2.92    $     2.63     $     2.35     $     1.95  $     1.60
  Fully Diluted                      2.80          2.49           2.28           1.95        1.60

Mortgages and other                                                                              
  investments                 $   555,791    $  507,768     $  508,135     $  303,979  $  145,713
Real estate properties, net       184,255       123,195        118,152        113,376     102,908
Total assets                      751,097       641,916        635,423        427,748     259,286
Long Term Debt                    160,008       141,103         90,210        110,967     113,844
Credit Facilities                  59,000        31,750        193,944         76,700      18,674
Convertible subordinated                                                                         
  debentures                       90,735        82,316        102,840        121,613      20,566
Total stockholders' equity        409,683       356,981        223,879        100,606      92,611

Common shares outstanding      23,474,751    20,535,014     14,047,563     12,762,117  12,213,270
Weighted average common shares                                                                   
  Primary                      21,938,631    16,396,403     13,245,521     12,509,881   8,341,221
  Fully Diluted                27,235,652    22,822,642     20,839,196     16,412,296  13,083,938

Common dividends declared                                                                        
  per share                   $     2.840    $    2.610     $    2.380     $    2.175  $    2.045


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ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                     
CONDITION AND RESULTS OF OPERATIONS                         

Overview                                                                        

National Health Investors, Inc. ("NHI" or the "Company")  is          
a real estate investment trust which invests primarily in income                
producing health care properties with emphasis on the long-term                 
care sector.  As of December 31, 1996, NHI had interests in net                 
real estate owned, mortgage investments and REMIC investments                   
totaling $740.0 million.  NHI's strategy is to invest in health                 
care real estate which generates current income which will be                   
distributed to stockholders.  NHI intends to implement this                     
strategy by making mortgage loans and acquiring properties to                   
lease nationwide primarily in the long-term health care industry.               

As of December 31, 1996, the Company has investments in 249           
health care facilities located in 25 states consisting of 204                   
long-term care facilities, three acute care hospitals, nine                     
medical office buildings, eight assisted living facilities, eight               
retirement centers and 17 residential projects for the                          
developmentally disabled.  These investments consisted of                       
approximately $519.2 million aggregate principal amount of loans                
to 47 borrowers and $184.2 million of purchase leaseback                        
transactions with seven lessees and $36.6 million invested in                   
REMIC pass through certificates backed by first mortgage loans to               
five operators.  Of these 249 facilities, 43 are leased to NHC                  
and nine additional facilities are managed by NHC.  (NHC is the                 
Company's investment advisor.)  Consistent with its strategy of                 
diversification, the Company has reduced the portion of its                     
portfolio operated or managed by NHC from 100.0% of total                       
invested assets on October 17, 1991 to 19.1% of total invested                  
assets on December 31, 1996.                                                    

At December 31, 1996, 72.1% of the total invested assets of           
the health care facilities were operated by public chain                        
operators, 20.0% by private chain operators, and 7.9% by small                  
operators.                                                                      

Liquidity and Capital Resources                                                 

Sources and Uses of Funds                                                       

During 1996, NHI has strengthened its capital structure by            
receiving an investment grade rating for its senior unsecured                   
debt, by obtaining longer term and lower cost debt, by issuing                  
additional convertible debt and as a result of the conversions of               
convertible debentures to common equity.  NHI's debt as a                       
percentage of capitalization is at a near all-time low and the                  
Company is in excellent position to grow by making additional                   
investments in 1997.                                                            

NHI has generated net cash from operating activities during           
1996 in the amount of $76.7 million.  The funds were used along                 
with $2.6 million proceeds from the sale of common stock, $255.7                
million of proceeds from new borrowings of long-term debt, $57.7                
million proceeds from the issuance of convertible subordinated                  
debentures and $105.1 million received from the prepayment and                  
collection of mortgage notes receivable to make additional                      
investments in income producing loans and real estate properties                
totaling approximately $221.0 million, to repay debt of $179.5                  
million and to pay dividends to stockholders of $64.5 million.                  

During 1996, NHI has taken steps to further strengthen its            
capital structure.  In September, 1996, NHI received an                         
investment grade rating on its senior unsecured debt which                      
lowered the cost on $200 million of bank debt.  Duff & Phelps                   
Credit Rating Co. assigned a BBB- debt rating citing NHI's stable               
cash flow provided by a diversified portfolio of investments in                 
health care properties, moderate financial leverage, and a track                
record of growth and profitability.                                             

In June 1996, NHI renegotiated its $100 million revolving             
line of credit for a lower spread over LIBOR compared to what was               
previously available and also to extend the maturity date for the               
entire $100 million credit agreement to June, 1999.  The amount                 
available to be drawn on the line of credit was $41.0 million at                
December 31, 1996.                                                              

In January 1996, NHI collected $53.6 million in proceeds              
from the sale of 7.75% convertible subordinated debentures.  In                 
January 1997, subsequent to our balance sheet date, NHI collected               
$58.5 million in proceeds from the sale of 7.0% convertible                     
debentures.  Throughout 1996, the Company's balance sheet was                   
further strengthened by the conversion of $31.5 million of NHI's                
outstanding convertible preferred stock and $49.3 million of                    
convertible debentures to common equity.                                        

During 1996, the Company received mortgage prepayments                
totaling $96.3 million. Proceeds were used to help reduce                       
borrowing under the Company's $100 million revolving credit                     
facility and to make new property and mortgage loan investments.                

At year end, debt as a percentage of total capitalization             
remains strong at 43%.  The Company continues to be well                        
positioned to take advantage of new investment opportunities.                   

Commitments                                                                     

At December 31, 1996, the Company was committed, subject to           
due diligence and financial performance goals, to fund                          
approximately $106.0 million in health care real estate projects,               
of which amount, approximately $66.1 million is expected to be                  
funded within the next 12 months.  The commitments include                      
mortgage loans or purchase leaseback agreements for five long-                  
term health care centers, two medical office buildings, one                     
retirement center, and 13 assisted living facilities all at rates               
ranging from 10% to 12%.  Also included in the $106.0 million of                
commitments is an $18.6 million commitment on a loan which is                   
secured by first mortgages on 43 long-term care centers.  Draws                 
on the $18.6 million commitment are limited to $3.7 million                     
annually.  In addition to the $106.0 million in commitments, NHI                
has entered into agreements to loan up to $18,900,000 in 1997 in                
connection with the early purchase of loans.                                    

Financing for current commitments and future commitments to           
others may be provided by borrowings under the Company's bank                   
credit facilities, new lines of credit, private placements or                   
public offerings of debt or equity, and the assumption of secured               
or unsecured indebtedness or by the sale of all or a portion of                 
certain currently held investments.                                             

The Company believes it has sufficient liquidity and                  
financing capability to finance future investments as well as                   
repay borrowings at or prior to their maturity.                                 

Results of Operations                                                           

Year Ended December 31, 1996 Compared to Year Ended December 31,                
1995.                                                                           

Net income for the year ended December 31, 1996 is $67.2              
million versus $49.7 million for 1995, an increase of 35.2%.                    
Fully diluted earnings per common share increased $0.31 or 12.4%                
to $2.80 in the 1996 period from $2.49 in the 1995 period.                      

Total revenues for the  year ended December 31, 1996                  
increased $11.5 million or 13.1% to $99.4 million from $87.9                    
million in the year ended December 31, 1995.  Revenues from                     
mortgage interest income increased $8.6 million or 15.9% when                   
compared to the same period in 1995.  Revenues from rental income               
increased $2.5 million or 7.8% in the 1996 period as compared to                
the 1995 period.  These increases resulted primarily from                       
investments in additional facilities during the last 12 months                  
and from the recognition of commitment fees.                                    

Total expenses for 1996 decreased $6.0 million or 15.6% to            
$32.2 million from $38.2 million for 1995.  Interest expense                    
decreased $6.7 million or 24.1% in 1996 as compared to 1995.                    
Depreciation on real estate increased $0.8 million or 13.5% while               
amortization of loan and organization costs decreased $0.5                      
million or 31.9% when compared to 1995.  General and                            
administrative costs increased $0.3 million or 9.3%.                            

The decrease in interest expense was due to decreased debt            
levels resulting from the lower average balances of credit                      
facility debt and from the conversion of 7.375%, 7.75% and 10%                  
convertible debentures to common stock.  The decrease in interest               
expense was offset in part by the increased interest on 7.75%                   
convertible debt, $45.0 million of which was issued in December,                
1995 and $55.0 million of which was issued in January, 1996.                    
Depreciation increased as a result of the Company's placing in                  
service newly constructed assets in 1996 and 1995.  General and                 
administrative expenses increased due to increased administrative               
expenses and advisory fees to NHC.                                              

Year Ended December 31, 1995 Compared to Year Ended December 31,                
1994                                                                            

Net income for the year ended December 31, 1995 is $49.7              
million versus $38.9 million for the same period in 1994, an                    
increase of 27.8%.  Fully diluted earnings per common share                     
increased 21 cents or 9.2%, to $2.49 in 1995 from $2.28 in 1994.                

Fourth quarter, non-recurring expenses related to debt                
restructuring totaled $1.2 million or seven cents per share                     
primary and five cents per share fully diluted on an annual                     
basis.  Of the $1.2 million in expenses, only $0.5 million was                  
for cash items.  Were it not for these one-time fourth quarter                  
costs, net income for 1995 would be $50.9 million, a 30.8%                      
increase over 1994.  Without the non-recurring expenses, fully                  
diluted net income per common share would be $2.54 per share for                
1995, an 11.4% increase over 1994.                                              

Total revenues for the year ended December 31, 1995                   
increased $17.1 million or 24.1% to $87.9 million from $70.9                    
million for the year ended December 31, 1994.  Revenues from                    
mortgage interest income increased $12.0 million, or 28.7%, when                
compared to the same period in 1994.  Revenues from rental income               
increased $4.7 million, or 17.2% in 1995 as compared to 1994.                   
These increases resulted primarily from investments in additional               
facilities during 1995 and 1994.                                                

Total expenses for the 1995 twelve month period increased             
$6.3 million or 19.6% to $38.2 million from $32.0 million for the               
1994 twelve month period.  Interest expense increased $5.2                      
million or 23.4% in the 1995 twelve month period as compared to                 
the 1994 period.  Depreciation of real estate increased $0.8                    
million or 14.4% while amortization of loan and organization                    
costs increased $0.3 million or 20.9% in 1995 when compared to                  
1994.  General and administrative costs increased $0.1 million or               
2.1%.                                                                           

The increase in interest expense is due primarily to higher           
average amounts borrowed in 1995 when compared to 1994.  Interest               
expense in 1995 includes $0.7 million expensed in excess of cash                
paid related to debentures converted into common stock.                         
Depreciation increased as a result of the Company placing newly                 
constructed assets in service in 1995 and 1994.                                 

Future Growth                                                                   

The Company expects increases in both mortgage interest               
income and rental income from the  additional investments it has                
made in mortgage loans and owned facilities during 1996 and 1995                
and from revenue participations and escalators the Company has                  
negotiated in its mortgages and leases.  Additionally, the                      
Company expects to make new investments in health care facilities               
that would increase interest and rental revenues as well as                     
interest and depreciation expense.  Increases in revenues are                   
expected to more than offset increases in associated expenses.                  

Impact of Inflation                                                             

Inflation may affect the Company in the future by changing            
the underlying value of the Company's real estate or by impacting               
on the Company's cost of financing its operations.                              

Revenues of the Company are primarily from long-term                  
investments.  Certain of the Company's leases require increases                 
in rent income based upon increases in the revenues of the                      
tenants.  The Company has negotiated similar provisions in many                 
of its mortgage notes receivable.                                               

New Accounting Pronouncement                                                    

In 1996, NHI adopted Statement of Financial Accounting                
Standards  No. 121, "Accounting for the Impairment of Long-Lived                
Assets and for Long-Lived Assets to be Disposed Of" and Statement               
of Financial Accounting Standards No. 123, "Accounting for Stock-               
Based Compensation".  The adoption of the provisions of these                   
accounting pronouncements did not have a material impact on NHI's               
financial condition or results of operations.                                   

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                           

The following Consolidated Financial Statements are included          
as Exhibit 13 and are incorporated in this Item 8 by reference:                 

a.   Report of Independent Public Accountants                         
b.   Consolidated Balance Sheets                                      
c.   Consolidated Statements of Income                                
d.   Consolidated Statements of Cash Flows                            
e.   Consolidated Statements of Stockholders' Equity                  

f.   Notes to Consolidated Financial Statements                       

The following table sets forth selected quarterly financial           
data for the two most recent fiscal years.                                      

                                                                · Download Table
Selected Quarterly Financial Data                             
(Unaudited, in thousands, except per share amounts)           


                           1st       2nd       3rd       4th  
                         Quarter   Quarter   Quarter   Quarter
1996                                                          
                                                              
Net Revenues             $23,344   $23,887   $25,275   $26,923
Net Income                15,638    16,401    16,939    18,186
Fully Diluted                                                 
   Earnings Per Share       .670      .690      .710      .730

1995                                                          

Net Revenues             $21,834   $20,876   $22,469   $22,745
Net Income                11,121    11,661    13,519    13,391
Fully Diluted                                                 
   Earnings Per Share       .610      .620      .650      .610


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                      
ACCOUNTING AND FINANCIAL DISCLOSURE                         

Not Applicable                                                        

PART III                

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT                        

MANAGEMENT                                                                      

The following table sets forth the directors and executive            
officers of the Company.  Each executive officer of the Company                 
is elected by the directors, serves at the pleasure of the Board                
of Directors and holds office until a successor is elected or                   
until the earliest of resignation or removal.  Directors hold                   
office until the annual meeting for the year in which their term                
expires and until their successor is elected and qualified.  A                  
director may be removed from office for cause only.                             
                                      Director
                                    Term
Name                Age       Position with Company    Expires                  

W. Andrew Adams     51        Director and President     1999                   
Richard F.                                                                      
LaRoche, Jr.      51        Director and Secretary     1998                 
Jack Tyrrell        50        Director                   1999                   
Robert T. Webb      52        Director                   1997                   
Ted H. Welch        63        Director                   1998                   

W. Andrew Adams has been President and a director of the              
Company since its inception in 1991.  Mr. Adams has also been                   
President of NHC since 1974.  He has served on the Multi-Facility               
Committee of the American Health Care Association, the trade                    
association for long-term health care center companies.  He has                 
an M.B.A. from Middle Tennessee State University.  Mr. Adams                    
serves on the Board of Directors of David Lipscomb University in                
Nashville, Tennessee and on the Board of Directors of SunTrust                  
Bank in Nashville, Tennessee.                                                   

Richard F. LaRoche, Jr. has served as Vice President,                 
Secretary and a director of the Company since its inception in                  
1991.  Mr. LaRoche has also been General Counsel of NHC since                   
1971, Secretary of NHC since 1974 and Senior Vice President of                  
NHC since 1986.  He received a J.D. from Vanderbilt University                  
and an A.B. from Dartmouth College.  Mr. LaRoche is responsible                 
for legal affairs, acquisitions and finance for both companies.                 

Jack Tyrrell has served as a director of the Company since            
its inception in 1991.  Mr. Tyrrell is a partner of Richland                    
Ventures, L.P. and Richland Ventures, L.P. II, venture capital                  
firms based in Nashville, Tennessee which were founded in May                   
1994 and September 1996.  He also currently serves as a general                 
partner of Lawrence, Tyrrell, Ortale & Smith and Lawrence,                      
Tyrrell, Ortale & Smith, II, L.P., venture capital partnerships                 
based in Nashville, Tennessee and New York, New York.  Mr.                      
Tyrrell serves as a director of Regal Cinemas, and Premier Parks,               
both of which are publicly held entities.                                       

Robert T. Webb has served as a director of the Company since          
its inception in 1991.  Mr. Webb is the owner of commercial                     
buildings and rental properties in the Middle Tennessee area, a                 
subdivision developer, and a partner in commercial properties                   
located in Rosslyn, Virginia and Phoenix, Arizona.  Mr. Webb has                
been President and the sole owner of Webb's Refreshments, Inc.                  
which has been in operation serving the Middle Tennessee area                   
since 1976.  Mr. Webb attended David Lipscomb College and                       
received a B.A. in business marketing from Middle Tennessee State               
University in 1969.                                                             

Ted H. Welch has served as a director of the Company since            
its inception in 1991.  Mr. Welch has owned and operated income                 
producing real estate (primarily office buildings) in the                       
southeastern United States since 1976. From 1953 until 1971, Mr.                
Welch worked for the Southwestern Company where he became                       
Executive Vice President.  From 1971 to 1974, he served as the                  
Commissioner of Finance and Administration for the State of                     
Tennessee, in which capacity he was responsible for all                         
construction and maintenance of State of Tennessee real property,               
along with being chief operating officer.  Mr. Welch received a                 
B.S. from the University of Tennessee at Martin and attended the                
Graduate School of Management at Indiana University. Mr. Welch is               
President and Chief Executive Officer of Eagle Communications.                  
Mr. Welch serves on the Board of Directors of American                          
Constructors, Inc.; First American National Bank, Nashville,                    
Tennessee; Logan's Roadhouse, Inc.; and Southeast Service                       
Corporation.                                                                    

The following employees of NHC have material involvement              
with the Company:                                                               

Donald K. Daniel (Vice President and Controller) joined NHC           
in 1977 as Controller.  He received a B.A. degree from Harding                  
University and an M.B.A. from the University of Texas.  He is a                 
certified public accountant.                                                    

Kenneth D. DenBesten (Vice President/Finance) has served as           
Vice President/ Finance  since 1992.  From 1987 to 1992, he was                 
employed by Physicians Health Care, most recently as Chief                      
Operating Officer.  From 1984 to 1986, he was employed by Health                
America Corporation as Treasurer, Vice President of Finance and                 
Chief Financial Officer.  Mr. DenBesten received a B.S. in                      
business administration and an M.S. in Finance from the                         
University of Arizona.                                                          

David H. Jones (Assistant Vice President/Development) has             
been associated with NHI since 1991.  He is responsible for                     
initial investment review and presentation.  Prior to that, he                  
was employed by USAA for 14 years in positions ranging from                     
programmer/analyst to acquisitions analyst in the real estate                   
investments company during which time over 30 properties were                   
closed totaling in excess of $200 million for various limited                   
partnerships which were created.  He has a B.S. in mathematics                  
from Middle Tennessee State University and an M.B.A. from the                   
University of Texas at San Antonio.                                             

Charlotte A. Swafford (Treasurer) has been Treasurer of NHC           
since 1985.  She joined the Company in 1973 and has served as                   
Staff Accountant, Accounting Supervisor and Assistant Treasurer.                
She has a B.S. degree from Tennessee Technological University.                  

ITEM 11.  EXECUTIVE COMPENSATION                                                

The Company's day to day operations are conducted by                  
personnel provided by NHC.  The Company does have two executive                 
officers, both of whom are also officers of NHC.  See "Business -               
Advisory Agreement".  The following table sets forth certain                    
information concerning the compensation of the Company's chief                  
executive officer and  the other executive officer of the                       
Company:                                                                        

Summary Compensation Table                                                      

Name and                                              
Principal Position       Year      Compensation             

W. Andrew Adams,         1996      $    (1)                 
President and Director   1995       450,000                 
        1994       400,000

Richard F LaRoche, Jr.   1996           (1)                 
Vice President,          1995       225,000                 
Secretary and Director   1994       200,000                 

(1)Allocated as part of the 1996 NHC performance bonus payment,                 
amounts not yet determined.                                                     

The compensations of Mr. Adams and Mr. LaRoche are set by             
the board of directors of the Managing Partner of NHC ("Managing                
Board") and are the obligations of NHC pursuant to the Advisory                 
Agreement.  Any compensation paid by the Company is credited                    
against the Advisory fee paid to NHC.  See "Business - Advisory                 
Agreement".  NHC's Managing Board is composed of J. K. Twilla,                  
Olin O. Williams, W. Andrew Adams, Ernest G. Burgess, III, and                  
Robert G. Adams.                                                                

Mr. Adams and Mr. LaRoche also serve as Executive Officers            
of the Managing Partner of NHC.                                                 

DIRECTORS' COMPENSATION                                                         

Directors not affiliated with NHC (Messrs. Welch, Tyrrell,            
and Webb) receive $2,500 for each meeting attended, plus                        
reimbursement for any actual travel expenses.  In addition, non-                
NHC affiliated directors are granted options to purchase 5,000                  
shares of Common Stock each year pursuant to the 1991 Stock                     
Option Plan.  See "Stock Option Plan" below.                                    

STOCK OPTION PLAN                                                               

The Company has adopted a 1991 Stock Option Plan (the "1991           
Option Plan") which was amended by stockholders in 1994                         
authorizing a total of 400,000 shares of Common Stock reserved                  
for issuance of incentive stock options qualifying under Section                
422A of the Code and non-qualified stock options.                               

The Stock Option Plan provides that the Executive Committee           
of the Board of Directors (composed of Messrs. Welch, Tyrrell and               
Webb) or the full Board of Directors, subject to the express                    
provisions of the Stock Option Plan, in its sole and absolute                   
discretion, may grant options  for a number of option shares, at                
the price and time, on the terms and conditions and to such                     
eligible participants as it deems advisable and specifies in the                
respective grants.  The Stock Option Plan permits options to be                 
granted to all directors, officers and full-time employees of the               
Company or any of its subsidiaries, and requires that options be                
granted at an exercise price of not less than 100% of the fair                  
market value of the Common Stock on the date of grant.  The 1991                
Option Plan has been amended and restated by the Board of                       
Directors and Shareholders to, among other things, provide for an               
automatic grant to each non-NHC affiliated director on March 4,                 
1993 of an option to purchase 5,000 shares of Common Stock and to               
increase the total number of shares reserved for issuance under                 
the Stock Option Plan to 400,000.  Each year thereafter, each                   
non-NHC affiliated director is automatically granted an option to               
purchase 5,000 shares of Common Stock at the highest closing                    
price on the date of the first annual meeting of shareholders                   
each calendar year.                                                             

The Stock Option Plan permits options to be exercised for             
cash or by surrender of shares of Common Stock of the Company                   
valued at the then fair market value.  During 1996, the Company                 
granted options to purchase 15,000 shares to its non-NHC                        
affiliated directors.  During 1996, Mr. Adams exercised options                 
to purchase 4,000 shares; Mr. LaRoche, 24,000 shares; Mr. Webb,                 
2,193 shares; Mr. Welch, 3,800 shares; and Mr. Tyrrell, no                      
shares.                                                                         

OPTIONS GRANTED IN 1996                                                         

The table below provides certain information on grants of             
stock options to the executive officers and directors pursuant to               
the Company's 1991 Option Plan during the fiscal year ended                     
December 31, 1996.  Although stock appreciation rights are                      
available under the plan, none have been issued to date.                        

                                                        · Enlarge/Download Table

                                                                     Potential Realizable    
                              Percent of                               Value at Assumed      
                                Total        Exercise                   Annual Rates of      
                              Options/SAR's  or Base                 Stock Price Appreciation
               Options/SAR's  Granted in     Price        Expiration  for Option Term (1)    
Name            Granted (#)   Fiscal Year    ($/Share)    Date         5% ($)     10% ($)    
----           -------------  -----------    ---------    ----        -------    -------     
                                                                                             
Ted H. Welch           5,000     33.3%     $33.500         3/20/01    $46,277   $102,260     
Jack Tyrrell           5,000     33.3%      33.500         3/20/01     46,277    102,260     
Robert T. Webb         5,000     33.3%      33.500         3/20/01     46,277    102,260     
W. Andrew Adams          -0-       -0-         -0-            ---         -0-        -0-     
Richard F. LaRoche, Jr.  -0-       -0-         -0-            ---         -0-        -0-     
____________                                                                                 

<F1>(1)   Amounts represent hypothetical gains that could be achieved for the                
          options if exercised at the end of the option terms.  These gains                  
          are based on assumed rates of stock appreciation of 5% and 10%                     
          compounded annually from the date the respective options were granted.             
          Actual gains, if any, on stock option exercises will depend on the                 
          future performance of the Common Stock and the date on which the                   
          options are exercised.                                                             

1996 YEAR-END OPTION VALUES                                                     

The following table summarizes certain information regarding          
stock options exercised during the fiscal year ended December 31,               
1996 and stock options held as of December 31, 1996 by the                      
Executive Officers and Directors.  No SARs were held or exercised               
during fiscal 1996.                                                             

                                                        · Enlarge/Download Table
                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR                               
                       AND FISCAL YEAR-END OPTION VALUES                                      

                                                    Number of Shares                          
                            Shares               Underlying Unexercised   Value of Unexercised
                         Acquired on     Value      Options at Fiscal     In-the-Money Options
                           Exercise     Realized        Year-End           at Fiscal Year-End 
Name                         (#)         ($)(1)            (#)                   ($)(2)       
----                     -----------   --------- ----------------------    -------------------
                                                                                              
W. Andrew Adams             4,000      $ 34,500          40,000              $482,000         
Richard F. LaRoche, Jr.    24,000       149,500           8,000               102,000         
Robert T. Webb              2,193        17,818           5,000                21,875         
Ted H. Welch                3,800        28,175           9,000                71,875         
Jack Tyrrell                  -0-           -0-          13,000               116,750         
____________                                                                                  

<F1>(1)   Represents the difference between the exercise price and the last                   
          sales price of the Common stock on the date of exercise.                            

<F2>(2)   Value based on the last sales price per share ($37.875) of the                      
          Company's Common Stock on December 31, 1996, as reported on the                     
          New York Stock Exchange, less the exercise price.                                   

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND                   
MANAGEMENT                                                  

The following table sets forth certain information as to the          
number of shares of Common Stock of the Company beneficially                    
owned as of December 31, 1996 (a) by each person (including any                 
"group" as that term is used in Section 13(d)(3) of the                         
Securities Exchange Act of 1934, as amended (the "Exchange Act")                
who is known to the Company to own beneficially 5% or more of the               
outstanding shares, (b) by each director, and (c) by all                        
executive officers and directors of the Company:                                

Names and Addresses           Number of Shares       Percentages of             
of Beneficial Owners          Beneficially Owned(1)  Total Shares               
--------------------          ---------------------  -------------              
W. Andrew Adams(2)                  994,557           4.2%                      
1927 Memorial Blvd.                                                             
Murfreesboro, TN  37129                                                         

Richard F. LaRoche, Jr.(3)          290,505           1.2%                      
2103 Shannon Drive                                                              
Murfreesboro, TN  37129                                                         

Jack Tyrrell(4)                      15,586            *                        
3100 West End Avenue                                                            
Nashville, TN  37203                                                            

Robert T. Webb(5)                    33,450            *                        
149 MTCS Drive                                                                  
Murfreesboro, TN  37129                                                         

Ted Welch(6)                         17,000            *                        
611 Commerce, 29th Floor                                                        
Nashville, TN  37219                                                            

Franklin Resources, Inc.          1,881,600           8.0%                      
777 Mariners Island Blvd.                                                       
San Mateo, CA  94404                                                            

Wasatch Advisors, Inc.            1,336,733           5.7%                      
68 South Main Street                                                            
Salt Lake City, UT  84101                                                       

All Executive Officers and                                                      
Directors as a Group                                                        
(5 persons)(7)                  1,351,098           5.8%                    
________________                                                                
*Less than 1%.                                                                  

(1)  The percentages shown are based on 23,474,751 shares of          
Common Stock outstanding on December 31, 1996 plus, as      
to each individual and group listed, the number of          
shares of Common Stock deemed to be owned by such           
holder pursuant to Rule 13d-3 under the Exchange Act as     
disclosed by Vickers Stock Research Corporation.            
(2)  Includes options to purchase 40,000 shares of Common             
Stock held by Mr. Adams.                                    
(3)  Includes options to purchase 8,000 shares of Common              
Stock held by Mr. LaRoche.                                  
(4)  Includes options to purchase 13,000 shares of Common             
Stock held by Mr. Tyrrell.                                  
(5)  Includes options to purchase 5,000 shares of Common              
Stock held by Mr. Webb.                                     
(6)  Includes options to purchase 9,000 shares of Common              
Stock held by Mr. Welch.                                    
(7)  Includes options to purchase 75,000 shares of Common             
Stock.                                                      

The Charter contains certain limitations on the number of             
shares of the Company's stock that any one stockholder may own,                 
which limitations are designed to ensure that the Company                       
maintains its status as a REIT.  This limitation (as amended)                   
states that no person (as defined in the Code) may own directly                 
or indirectly 9.9 percent or more of the Common Stock of the                    
Company.  Any shares of Common Stock in excess of such limits are               
deemed to be "Excess Common Stock".  Excess Common Stock shall be               
deemed automatically to have been converted into a class separate               
and distinct from the class from which converted and from any                   
other class of Excess Common Stock, each such class being                       
designated "Excess Common Stock of [stockholder's name]".  No                   
Excess Common Stock may be voted, nor considered outstanding for                
the purpose of determining a quorum at any meeting of                           
stockholders.  Any dividends or other distributions payable upon                
the Excess Common Stock may, in the discretion of the Company, be               
paid into a non-interest bearing account and released to the                    
stockholder only at such time as he or she ceases to be the                     
holder of Excess Common Stock.  The Company, upon authorization                 
of the Board of Directors, may redeem any or all Excess Common                  
Stock, and from the date of the giving of notice of redemption                  
such shares shall cease to be outstanding and the stockholder                   
shall cease to be entitled to dividends, voting rights and other                
benefits with respect to such shares.  The redemption price will                
be based on the trading prices of the class of stock from which                 
the Excess Common Stock being redeemed were converted, and is                   
payable, without interest, only upon the liquidation of the                     
Company.  However, the Charter contains provisions under which                  
the holder of Excess Common Stock may cause the Company to                      
rescind such redemption by selling (and notifying the Company of                
such sale), within 30 days after notice of the redemption, a                    
number of the shares of Common Stock held by such holder equal to               
the number of shares of Excess Common Stock. In addition, Excess                
Common Stock held by any holder may be converted back into shares               
of Common Stock if the holder sells such shares prior to their                  
being called for redemption.                                                    

Upon demand of the Company, each stockholder must disclose            
to the Company such information with respect to direct and                      
indirect ownership of stock owned (or deemed to be owned after                  
applying the rules applicable to REITs under the Code) as the                   
Board of Directors deems reasonably necessary in order that the                 
Company may fully comply with the REIT provisions of the Code.                  
Proposed transferees of stock must also satisfy the Board, upon                 
demand, that such transferees will not cause the Company to fall                
out of compliance with such provisions.                                         

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        

ADVISORY, ADMINISTRATIVE SERVICES AND FACILITIES AGREEMENT                      

The Company entered into an Advisory, Administrative                  
Services and Facilities Agreement with NHC as "Advisor" under                   
which NHC provides management and advisory services to the                      
Company during the term of the Advisory Agreement.  See "Business               
- Advisory, Administrative Services and Facilities Agreement".                  

LEASES                                                                          

Pursuant to NHC's conveyance of certain of the Health Care            
Facilities to the Company, the Company leases to NHC 43 of the                  
Health Care Facilities.  Pursuant to these Leases, the Company                  
and NHC have entered into a Master Agreement to Lease.  See                     
"Business - NHC Master Agreement to Lease".  Since the date of                  
the original lease to NHC (October 17, 1991), NHC has expanded                  
the number of licensed beds at three of the 43 centers.  By                     
authority and unanimous vote of the non-NHC affiliated Directors,               
at such time as the bed additions were completed, NHI reimbursed                
NHC its actual out of pocket costs and expenses in connection                   
with the plant expansions and received a corresponding increase                 
in the base rent paid by NHC.  The three expansions were funded                 
at a cost of $10,534,135 in 1995 and the lease increases at the                 
three centers are now in effect.  At the expiration of the                      
leases, all of the expansions remain the full and complete                      
property of NHI.                                                                

THE NOTES                                                                       

The Company was the holder of four notes receivable dated             
between 1990 and 1991 representing various amounts (the "Notes")                
loaned to the owners of four nursing homes in Florida managed by                
NHC.  These Notes were contributed to NHI, along with their                     
corresponding mortgage debt (see below) by NHC when it formed NHI               
in October 1991.  NHC reacquired these Notes at par for cash and                
the assumption of the Mortgage Debt on November 1, 1994.  The                   
Company believes the Notes outstanding principal was the fair                   
market value therefor.                                                          

THE MORTGAGE DEBT                                                               

In connection with NHC's conveyance of 43 of the Health Care          
Facilities (the "NHC Health Care Facilities") to the Company in                 
1991, the Company assumed mortgage debt of $120.4 million (the                  
"NHC Mortgage Debt").  As of December 31, 1996, and after the                   
reassumption of the mortgage debt attributed to the Notes, (see                 
above) and the early retirement by the Company of $20,662,000 for               
which NHC is still obligated under the original terms, the                      
aggregate principal balance of the mortgage debt was $66.1                      
million.  If the Company were required to redeem all or a                       
material portion of such debt, there can be no assurance that the               
Company would be able to replace such debt on the same or similar               
terms or in a similar amount.  NHC has agreed to indemnify and                  
hold the Company harmless from certain costs and damages incurred               
in refinancing or so redeeming this debt, including closing or                  
commitment fees, legal fees, and increased interest rates.  The                 
balance of the mortgage indebtedness encumbering the Health Care                
Facilities received from NHC is long-term self-amortizing debt                  
with final maturities from 1995 through 2015.                                   

Although the Company assumed the NHC Mortgage Debt, NHC               
remains liable on such debt and the Company has agreed to                       
indemnify NHC in respect of such continuing liability.  In                      
connection with the transfer of the NHC Health Care Facilities                  
and the Notes to the Company, and the assumption by the Company                 
of the NHC Mortgage Debt, NHC and the Company obtained the                      
written consent of each material lender of such Mortgage Debt and               
of the Guaranteed Debt (defined below).  In addition, the Company               
and NHC have covenanted with such lenders to maintain certain                   
debt coverage and similar financial ratios.  Although there can                 
be no assurance, management believes that the Company and NHC                   
will be able to comply with each such covenant, during all                      
relevant periods.  In the event, however, that the Company or NHC               
fails to comply with any such covenant, and such failure is                     
deemed to constitute a default under the related NHC Mortgage                   
Debt or Guaranteed Debt, the Company may be required to retire                  
such NHC Mortgage Debt or Guaranteed Debt prior to its stated                   
maturity.  A default under such debt, if not waived or cured,                   
could result in a loss of certain of the Company's assets through               
foreclosure or other means.  NHC has agreed to indemnify and hold               
the Company harmless from suffering any loss, liability or harm                 
as a result of this cross-collateralization, regardless of the                  
form of such loss, liability or harm.                                           

The majority of the NHC Mortgage Debt is cross-defaulted              
with other NHC liabilities and is cross-collateralized as                       
mentioned above.  Thus, in the event NHC defaulted on its                       
remaining obligations under its debt package, the Company could                 
lose its interest in the Notes or the NHC Health Care Facilities,               
even if its own payments on the NHC Mortgage Debt were current.                 

THE GUARANTEED DEBT                                                             

In order to obtain the consent of appropriate lenders to              
NHC's transfer of assets to NHI, NHI guaranteed the debt                        
($24,397,000 at December 31, 1996) of unrelated parties which NHC               
has also guaranteed.  The debt is at fixed interest rates with a                
weighted average interest rate of 8.4% at December 31, 1996.  NHI               
receives from NHC compensation of approximately $121,986 per                    
annum for the guarantees which is credited against NHC's base                   
rent requirements.  Additionally, NHI has outstanding letters of                
credit for $11,253,000 of debt.  NHI also has guaranteed bank                   
loans in the amount of $1,948,000 to key employees and directors                
of the Company and NHC employees and directors utilized for the                 
exercise of stock options.  No fee is charged for these option                  
exercise guarantees.                                                            

In management's opinion, these guarantee fees approximate             
the guarantee fees that NHI would currently charge to enter into                
similar guarantees.                                                             

All of the guaranteed indebtedness is secured by first                
mortgages, pledges of personalty, accounts receivable and, in                   
certain instances, by the guarantees of the owners of the                       
facilities.  The borrower has granted second mortgages over the                 
relevant properties in favor of NHC, and NHC has assigned its                   
rights in such mortgages to NHI.  Such rights may be enforced if                
either party is required to pay under their respective                          
guarantees.  NHC has agreed to indemnify and hold harmless NHI                  
against any and all loss, liability or harm incurred by NHI as a                
result of having to perform under its guarantee of any or all of                
the guaranteed debt.                                                            

MANAGEMENT CONFLICT OF INTEREST                                                 

Two of the five directors and all of the officers of the              
Company occupy positions with NHC, and therefore, there may be                  
conflicts of interest in their duties to the NHC Unitholders and                
Company stockholders.  Although the Directors of the Company                    
believe the terms of the NHC leases and the Advisory Agreement                  
are fair and reasonable, not all of the terms of the leases or                  
the Advisory Agreement are fair and reasonable, not all of the                  
terms of the leases or the Advisory Agreement were negotiated on                
an arm's-length basis.  The Company may purchase additional                     
equity interests in real estate from, or make additional mortgage               
loans to, NHC.  Since NHC will be the Company's investment                      
advisor, it will have a conflict of interest in determining the                 
price to be paid by the Company for additional assets which may                 
be purchased from NHC and the terms of any leases to be entered                 
into between the Company and NHC.                                               

Counsel to NHC also represents the Company on certain                 
matters.  In the course of such representation, circumstances may               
arise in which NHC and the Company have conflicting interests, in               
which event separate counsel will be retained to represent one or               
both of the parties.                                                            

OPTION EXERCISE LOAN GUARANTY PROGRAM                                           

The Company has implemented an option exercise loan guaranty          
program, the purpose of which is to facilitate Directors and key                
personnel exercising options to purchase  NHI common stock.                     
Pursuant to Board of Directors' resolution unanimously passed,                  
each Director and Key Employee to whom options to purchase NHI                  
common shares have been granted is eligible to obtain an NHI                    
guaranty of up to $100,000 per year on loans made from commercial               
banking institutes, the proceeds of which are used to exercise                  
NHI options.  The guarantee is structured as follows:  Option                   
holders must pledge to NHI 125% of the loan amount in publicly                  
traded stock as additional collateral for the guarantee; the                    
option holder must personally guarantee the loan to the bank; the               
interest rate charged by the bank and all expenses pertaining to                
the loan are to be borne by the Director or Employee and the                    
maximum outstanding amount of loan guarantees is $5,000,000.                    
Furthermore, this facility is to have a one year term and be                    
renewable at the Board's discretion.  The below table indicates                 
the current amount of loans outstanding by Directors of NHI                     
individually and by all designated NHC employees collectively as                
of December 31, 1996.                                                           

Current        Maximum              
         Loan           Loan       Commercial Bank
      Outstanding    Outstanding    Originating Loan
      -----------    -----------    ----------------
W. Andrew Adams     $    -0-       $    -0-            --                       
Richard F.                                                                      
LaRoche, Jr.        300,000        300,000     SouthTrust Bank            
Jack Tyrrell             -0-            -0-            --                       
Robert T. Webb         225,686        245,000     Union Planters                
Bank                                                                            
Ted Welch               99,125        100,000     SouthTrust Bank               
NHC Employees          100,000        100,000     Union Planters                
Bank                                                                            
NHC Employees        1,223,265      1,300,000     SouthTrust Bank               

PART IV               

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON               
FORM 8-K                                                    

FINANCIAL STATEMENTS AND SCHEDULES                                              

(a)  The following documents are filed as part of this                
Report:                                                                         

1.   Financial Statements                                   

The Consolidated Financial Statements are included as                 
Exhibit 13 and are filed as part of this report.                                

2.   Financial Statement Schedules                          

The Financial Statement Schedules and Report of Independent           
Public Accountants on Financial Statement Schedules listed in the               
Index to Financial Statements are filed as part of this Form 10-K.              

3.   Exhibits                                               

Exhibits required as part of this report are listed in the            
index appearing on Page 42.                                                     

(b)  Reports on Form 8-K.  -  None                                    

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SIGNATURES                

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Murfreesboro, State of                
Tennessee, on the 5th day of March, 1997.                                       

           NATIONAL HEALTH INVESTORS, INC.

            BY:  /s/ Richard F. LaRoche, Jr.
                 ---------------------------
             Richard F. LaRoche, Jr.
Secretary 

Pursuant to the requirements of the Securities Exchange Act           
of 1934, this Report has been signed on the dates indicated by                  
the following persons in the capacities indicated.                              

Signature                Title                    Date                
---------                -----                    ----                

/s/ W. Andrew Adams        President & Director        March 5, 1997            
W. Andrew Adams          (Principal Executive Officer)                          

/s/ Richard F. LaRoche, Jr. Secretary and Director     March 5, 1997            
Richard F. LaRoche, Jr.  (Principal Financial Officer)                          

----------------------        Director                 March 5, 1997            
Jack Tyrrell                                                                    

/s/ Robert T. Webb            Director                 March 5, 1997            
Robert T. Webb                                                                  

---------------------         Director                 March 5, 1997            
Ted H. Welch                                                                    

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NATIONAL HEALTH INVESTORS, INC. 
FORM 10-K FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996

                                                                · Download Table
                           EXHIBIT INDEX                                      


Exhibit No.    Description                       Page No. or Location         
-----------    -----------                       --------------------         
                                                                              
         3.1   Articles of Incorporation         Incorporated by reference    
                                                 to Exhibit 3.1 to Form S-11  
                                                 Registration Statement       
                                                 No. 33-41863                 

         3.2   By laws                           Incorporated by reference    
                                                 to Exhibit 3.2 to Form S-11  
                                                 Registration Statement       
                                                 No. 33-41863                 

         4.1   Form of Common Stock Certificate  Incorporated by reference    
                                                 to Exhibit 39 to Form S-11   
                                                 Registration Statement       
                                                 No. 33-41863                 

         4.2   Form of Preferred Convertible     Incorporated by reference    
               Stock Certificate                 to Exhibit 60 to Form S-3    
                                                 Registration Statement       
                                                 No. 33-72370                 

         4.3   Form of Debenture due 2006        Incorporated by reference    
               (10%)                             to Exhibit 38 to Form S-11   
                                                 Registration Statement       
                                                 No. 33-41863                 

         4.4   Form of Indenture Governing       Incorporated by reference    
               the Debentures                    to Exhibit 4.3 to Form S-4   
                                                 Registration Statement No.   
                                                 33-41863                     

         4.5   Form of Debenture due 2001        Incorporated by reference    
               (7-3/4%)                          to Exhibit 4.3 to Form S-3   
                                                 Registration Statement       
                                                 No. 33-85398                 

         4.6   Form of Debenture due 2006        Incorporated by reference    
               (7%)                              to Exhibit 1 to Form S-3     
                                                 Registration Statement       
                                                 No. 33-72370                 

         4.7   First Supplemental Indenture      Incorporated by reference    
               Dated December 15, 1995           to Exhibit 4.7 to Form 10-K  
                                                 dated February 26, 1996      

         10    Materials Contracts               Incorporated by reference    
                                                 from Exhibits 10.1 thru      
                                                 10.9 to Form S-4 Registration
                                                 Statement No. 33-41863       

        10.12  1991 Stock Option Plan            Incorporated by reference    
                                                 from Exhibit 10.12 to Form   
                                                 S-4 Registration No. 33-41863

         13    Report of Independent Public      Filed Herewith               
                  Accountants                                                 
               Consolidated Balance Sheets                                    
               Consolidated Statements of Income                              
               Consolidated Statements of                                     
                  Cash Flows                                                  
               Consolidated Statements of                                     
                  Stockholders' Equity                                        
               Notes to Consolidated Financial                                
                  Statements                                                  

         24    Consent of Independent Public     Filed Herewith               
               Accountants                                                    

         27    Financial Data Schedule (for SEC purposes only)                


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EXHIBIT 13                

NATIONAL HEALTH INVESTORS, INC.               

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES               

Financial Statements                                                            

Report of Independent Public Accountants                                        

Consolidated Balance Sheets-December 31, 1996 & 1995                            

Consolidated Statements of Income-For the Years Ended                           
December 31, 1996, 1995 and 1994                            

Consolidated Statements of Cash Flows-For the Years Ended                       
December 31, 1996, 1995 and 1994                            

Consolidated Statements of Stockholders' Equity-For the                         
Years Ended December 31, 1996, 1995 and 1994                

Notes to Consolidated Financial Statements                                      

Financial Statements Schedules                                                  

Report of Independent Public Accountants on Financial                           
Statement Schedules                                         

Schedule III   Real Estate and Accumulated                                      
Depreciation                            

Schedule IV Mortgage Loans on Real Estate                                       

  All other schedules are not submitted because they are not
applicable or not required or because the required information is               
included in the financial statements or notes thereto.                          

 The 1996 consolidated financial statements, together with
the Report of Independent Public Accountants, listed in the above               
index are filed herewith.                                                       

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NATIONAL HEALTH INVESTORS, INC.                                                 

Report of Independent Public Accountants                                        

To the Stockholders of National Health Investors, Inc.:                         

We have audited the accompanying consolidated balance sheets
of National Health Investors, Inc. (a Maryland corporation                      
incorporated on July 24, 1991 which began operations on October                 
17, 1991) and subsidiaries as of December 31, 1996 and 1995, and                
the related consolidated statements of income, stockholders'                    
equity and cash flows for the years ended December 31, 1996, 1995               
and 1994.  These consolidated financial statements are the                      
responsibility of the Company's management.  Our responsibility                 
is to express an opinion on these consolidated financial                        
statements based on our audits.                                                 

 We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and                   
perform the audits to obtain reasonable assurance about whether                 
the consolidated financial statements are free of material                      
misstatement.  An audit includes examining, on a test basis,                    
evidence supporting the amounts and disclosures in the                          
consolidated financial statements.  An audit also includes                      
assessing the accounting principles used and significant                        
estimates made by management, as well as evaluating the overall                 
consolidated financial statement presentation.  We believe that                 
our audits provide a reasonable basis for our opinion.                          

  In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial                
position of National Health Investors, Inc. and subsidiaries as                 
of December 31, 1996 and 1995, and the results of their                         
operations and their cash flows for the years ended December 31,                
1996, 1995 and 1994, in conformity with generally accepted                      
accounting principles.                                                          

ARTHUR ANDERSEN LLP                                                             

Nashville, Tennessee                                                            
January 11, 1997                                                                

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NATIONAL HEALTH INVESTORS, INC.                                                 

                                                                · Download Table
Consolidated Balance Sheets                                                    

(In thousands, except share amounts)                                           

December 31                                                  1996        1995  
                                                                               
Assets                                                                         
  Real estate properties:                                                      
   Land                                                    $ 20,468   $  8,238 
   Buildings and improvements                               192,095    136,891 
   Construction in progress                                     587        129 
                                                            -------    ------- 
                                                            213,150    145,258 
   Less accumulated depreciation                            (28,895)   (22,063)
                                                            -------    ------- 
  Real estate properties, net                               184,255    123,195 

  Mortgage and other notes receivable                       519,229    469,628 
  Investments in real estate mortgage                                          
    investment conduits                                      36,562     38,140 
  Interest and rent receivable                                5,382      6,061 
  Cash and cash equivalents                                   3,400      2,122 
  Deferred costs and other assets                             2,269      2,770 
                                                            -------    ------- 
    Total Assets                                           $751,097   $641,916 
                                                            =======    ======= 
Liabilities and Deferred Income                                                
  Long-term debt                                           $160,008   $141,103 
  Credit facilities                                          59,000     31,750 
  Convertible subordinated debentures                        90,735     82,316 
  Accounts payable and other accrued expenses                 3,131      3,656 
  Accrued interest                                            1,984      1,468 
  Dividends payable                                          17,371     15,602 
  Deferred income                                             9,185      9,040 
                                                            -------    ------- 
    Total Liabilities and Deferred Income                   341,414    284,935 
                                                            -------    ------- 
  Commitments and guarantees                                                   

Stockholders' Equity                                                           
  Cumulative convertible preferred stock, $.01 par value;                      
    10,000,000 shares authorized;                                              
    1,050,122 and 2,311,533 shares, respectively,                              
    issued and outstanding; stated                                             
    at liquidation preference of $25 per share               26,253     57,788 
  Common stock, $.01 par value;                                                
    40,000,000 shares authorized;                                              
    23,474,751 and 20,535,014 shares,                                          
    respectively, issued and outstanding                        235        205 
  Capital in excess of par value                            395,204    311,908 
  Cumulative net income                                     195,514    128,350 
  Cumulative dividends                                     (207,523)  (141,270)
                                                            -------    ------- 
    Total Stockholders' Equity                              409,683    356,981 
                                                            -------    ------- 
    Total Liabilities and Stockholders' Equity             $751,097   $641,916 
                                                            =======    ======= 

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

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NATIONAL HEALTH INVESTORS, INC.                                                 

                                                                · Download Table
Consolidated Statements of Income                                              

(In thousands, except share amounts)                                           

Year Ended December 31                           1996        1995        1994  

                                                                               
Revenues:                                                                      
         Mortgage interest income              $  62,508   $  53,919  $  41,889
         Rental income                            34,579      32,061     27,345
         Investment interest                                                   
            and other income                       2,342       1,944      1,616
                                                 -------     -------    -------
                                                  99,429      87,924     70,850
                                                 -------     -------    -------
Expenses:                                                                      
         Interest                                 20,633      27,205     22,053
         Depreciation of real estate               6,832       6,020      5,263
         Amortization of loan and organization                                 
           costs                                   1,115       1,637      1,354
         General and administrative                3,685       3,370      3,300
                                                 -------     -------    -------
                                                  32,265      38,232     31,970
                                                 -------     -------    -------
Net income                                        67,164      49,692     38,880
                                                 -------     -------    -------
Dividends to preferred stockholders                3,118       6,613      7,729
                                                 -------     -------    -------
Net income applicable to common stock          $  64,046   $  43,079  $  31,151
                                                 =======    ========   ========
Net income per common share:                                                   
         Primary                                   $2.92       $2.63      $2.35
         Fully diluted                              2.80        2.49       2.28

Weighted average common shares outstanding:                                    
         Primary                              21,938,631  16,396,403 13,245,521
         Fully diluted                        27,235,652  22,822,642 20,839,196


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

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NATIONAL HEALTH INVESTORS, INC.                                                 

                                                                · Download Table

Consolidated Statements of Cash Flows                                      
(In thousands)                                                             

Year Ended December 31                          1996      1995       1994  
                                                                           
Cash flows from operating activities:                                      
  Net income                                 $  67,164 $  49,692  $ 38,880 
  Depreciation of real estate                    6,832     6,020     5,263 
  Amortization of loan and organization costs    1,115     1,637     1,354 
  Interest on debenture conversion                 719       659       161 
  Deferred income                                6,335       530     2,577 
  Recognition of deferred income                (6,190)   (1,542)   (1,330)
  (Increase) decrease in interest and                                      
     rent receivable                               679    (1,349)   (1,628)
  (Increase) decrease in other assets               68       232       (60)
  Increase (decrease) in accounts payable                                  
    and accrued liabilities                         (9)     (665)    2,556 
                                              --------   -------   ------- 
     Net cash provided by operating activities  76,713    55,214    47,773 
                                              --------   -------   ------- 
Cash flows from investing activities:                                      
  Investment in mortgage notes receivable     (153,084)  (85,145) (249,602)
  Investment in real estate mortgage                                       
    investment conduit                             ---    (6,158)    ---   
  Collection of mortgage notes receivable        8,750     8,423     8,918 
  Prepayment of mortgage notes receivable       96,311    83,247    37,978 
  Acquisition of and construction of                                       
    property and equipment, net                (67,892)  (11,063)  (10,053)
                                              --------   -------   ------- 
     Net cash used in investing activities    (115,915)  (10,696) (212,759)
                                              --------   -------   ------- 
Cash flows from financing activities:                                      
  Borrowings of short-term loans payable           ---       ---    85,000 
  Repayment of short-term loans payable            ---   (84,792)     (208)
  Proceeds from long-term debt                 225,668   115,085   124,159 
  Principal payments on long-term debt        (179,513) (141,594) (112,464)
  Proceeds from issuance of convertible                                    
    subordinated debentures                     57,735    48,671       --- 
  Proceeds from sale of cumulative convertible                             
    preferred stock                                ---       ---   109,558 
  Financing costs paid                          (1,548)   (1,409)   (5,098)
  Dividends paid to stockholders               (64,484)  (44,102)  (38,113)
  Sale of stock and exercise of stock options    2,622    65,729       550 
                                               -------   -------   ------- 
     Net cash provided by (used in)                                        
        financing activities                    40,480   (42,412)  163,384 
                                               -------   -------   ------- 
Increase (decrease) in cash and cash equivalents 1,278     2,106    (1,602)
Cash and cash equivalents, beginning of period   2,122        16     1,618 
                                               -------   -------   ------- 
Cash and cash equivalents, end of period     $   3,400 $   2,122  $     16 
                                               =======   =======   ======= 
</table)                                                                   
The accompanying notes to consolidated financial statements are an integral
part of these consolidated financial statements.                           

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                                                        · Enlarge/Download Table

NATIONAL HEALTH INVESTORS, INC.                                                                                  
Consolidated Statements of Stockholders' Equity                                                                  
(In thousands, except share amounts)                                                                             
                          Cumulative Convertible                  Capital in                         Total       
                              Preferred Stock     Common Stock    Excess of  Cumulative Cumulative  Stockholders'
                              Shares   Amount   Shares     Amount Par Value  Net Income Dividends    Equity      
                              ------   ------   ------     ------ ---------- ---------- ----------  ------------ 
                                                                                                                 
Balance at 12/31/93               ---  $    --- 12,762,117 $  128 $111,425   $ 39,778   $(50,725)    $100,606    
Net income                        ---       ---        ---    ---      ---     38,880        ---       38,880    
Shares sold                       ---       ---     22,000    ---      550        ---        ---          550    
Shares issued in conversion of                                                                                   
   convertible debentures                                                                                        
   to common stock                ---       ---    739,157      7   18,450        ---        ---       18,457    
Sale of cumulative convert-                                                                                      
   ible preferred stock     4,382,300   109,558        ---    ---   (4,623)       ---        ---      104,935    
Shares issued in conversion                                                                                      
   of preferred stock to                                                                                         
   common stock              (579,340)  (14,484)   524,289      5   14,479        ---        ---          ---    
Dividends to common stock-                                                                                       
   holders ($2.380 per share)     ---       ---        ---    ---      ---        ---    (31,821)     (31,821)   
Dividends to preferred stock-                                                                                    
   holders ($1.853 per share)     ---       ---        ---    ---      ---        ---     (7,728)      (7,728)   
Balance at 12/31/94         3,802,960    95,074 14,047,563    140  140,281     78,658    (90,274)     223,879    
Net income                        ---       ---        ---    ---      ---     49,692        ---       49,692    
Shares sold                       ---       ---  2,534,453     25   65,704        ---        ---       65,729    
Shares issued in conversion                                                                                      
   of convertible debentures                                                                                     
   to common stock                ---       ---  2,603,317     27   68,650        ---        ---       68,677    
Shares issued in conversion                                                                                      
   of preferred stock to                                                                                         
   common stock            (1,491,427)  (37,286) 1,349,681     13   37,273        ---        ---          ---    
Dividends to common stock-                                                                                       
   holders ($2.610 per share)     ---       ---        ---    ---      ---        ---    (44,383)     (44,383)   
Dividends to preferred stock-                                                                                    
   holders ($2.125 per share)     ---       ---        ---    ---      ---        ---     (6,613)      (6,613)   
Balance at 12/31/95         2,311,533    57,788 20,535,014    205  311,908    128,350   (141,270)     356,981    
Net income                        ---       ---        ---    ---      ---     67,164        ---       67,164    
Shares sold                       ---       ---     95,878      1    2,621        ---        ---        2,622    
Shares issued in conversion                                                                                      
   of convertible debentures                                                                                     
   to common stock                ---       ---  1,702,366     18   49,151        ---        ---       49,169    
Shares issued in conversion                                                                                      
   of preferred stock to                                                                                         
   common stock            (1,261,411)  (31,535) 1,141,493     11   31,524        ---        ---          ---    
Dividends to common stock-                                                                                       
   holders ($2.840 per share)     ---       ---        ---    ---      ---        ---    (63,135)     (63,135)   
Dividends to preferred stock-                                                                                    
   holders ($2.125 per share)     ---       ---        ---    ---      ---        ---     (3,118)      (3,118)   
Balance at 12/31/96         1,050,122   $26,253 23,474,751 $  235 $395,204   $195,514  $(207,523)    $409,683    
                            =========    ====== ==========  =====  =======    =======   ========      =======    

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994                                   

NOTE 1. ORGANIZATION                                                            

National Health Investors, Inc. ("NHI" or the "Company") is 
a Maryland real estate investment trust which was incorporated on               
July 24, 1991.  The majority of NHI's revenue is derived from                   
interest income on mortgage loans and from rent generated on                    
leased properties.  NHI invests in health care properties                       
including long-term care centers, acute care hospitals, medical                 
office buildings, assisted living facilities and retirement                     
centers.  These properties are located throughout the United                    
States and are operated by qualified health care providers.                     

NHI commenced operations on October 17, 1991 with the       
contribution of assets and debts from National HealthCare L.P.                  
("NHC") in exchange for common stock.                                           

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                              

Basis of Presentation - The consolidated financial          
statements include the accounts of NHI and its wholly-owned                     
subsidiaries.  Significant intercompany accounts and transactions               
have been eliminated.                                                           

Use of Estimates - The preparation of financial statements  
in conformity with generally accepted accounting principles                     
requires management 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.                                                                

Real Estate Properties - NHI records properties at cost,    
including capitalized interest during construction periods.  Real               
property transferred from NHC was recorded at NHC's historical                  
cost book value at the date of transfer.  NHI uses the straight-                
line method of depreciation for buildings and improvements over                 
their estimated remaining useful lives of up to 40 years.                       

In March 1995, the Financial Accounting Standards Board     
issued Statement of Financial Accounting Standards No. 121,                     
"Accounting for the Impairment of Long-Lived Assets and for Long-               
Lived Assets to be Disposed of" ("SFAS 121").  NHI adopted the                  
provisions of SFAS 121 effective January 1, 1996.  The effect of                
adoption of SFAS 121 is not material to NHI's financial                         
statements.  NHI evaluates the recoverability of the carrying                   
values of its properties on a property by property basis.                       

Cash Equivalents - Cash equivalents consist of all highly   
liquid investments with a maturity of three months or less.                     

Federal Income Taxes -  NHI intends at all times to qualify 
as a real estate investment trust under Sections 856 through 860                
of the Internal Revenue Code of 1986, as amended.  Therefore, NHI               
will not be subject to federal income tax provided it distributes               
at least 95% of its annual real estate investment trust taxable                 
income to its stockholders and meets other requirements to                      
continue to qualify as a real estate investment trust.                          
Accordingly, no provision for federal income taxes has been made                
in the financial statements.                                                    

The primary difference between NHI's tax basis and the      
reported amounts of NHI's assets and liabilities is a higher tax                
basis than book basis (by approximately $18,428,000) in its real                
estate properties.                                                              

Earnings and profits, which determine the taxability of     
dividends to stockholders, differ from net income reported for                  
financial reporting purposes due primarily to differences in the                
basis of assets, differences in recognition of commitment fees,                 
differences in the estimated useful lives used to compute                       
depreciation expense and differences in the treatment of accrued                
interest expense which existed at the time the debentures were                  
converted to common stock.                                                      

Concentration of Credit Risks - NHI's credit risks primarily
relate to cash and cash equivalents, to the investments in real                 
estate mortgage investment conduits and to mortgage and other                   
notes receivable.  Cash and cash equivalents are primarily held                 
in bank accounts and overnight investments.  The investments in                 
real estate mortgage investment conduits relate to a                            
participating interest in two real estate mortgage investment                   
conduits as discussed in Note 6.  Mortgage and other notes                      
receivable relate primarily to secured loans with health care                   
facilities as discussed in Note 4.  NHI also has loan                           
participation agreements which it purchased from a financial                    
institution on certain mortgage and other notes receivable.                     

NHI's financial instruments, principally its investments in 
the real estate mortgage investment conduits and notes                          
receivable, are subject to the possibility of loss of the                       
carrying values as a result of either the failure of other                      
parties to perform according to their contractual obligations or                
changes in market prices which may make the instruments less                    
valuable.  NHI obtains various collateral and other protective                  
rights, and continually monitors these rights, in order to reduce               
such possibilities of loss.  NHI evaluates the need to  provide                 
for reserves for potential losses on its financial instruments                  
based on management's periodic review of its portfolio on an                    
instrument by instrument basis.  See Notes 4 and 6 for additional               
information on the real estate mortgage investment conduits and                 
notes receivable.                                                               

Deferred Costs - Costs incurred to acquire financings are   
amortized by the interest method over the term of the related                   
debt.                                                                           

Loan Commitment Fees - Non-refundable loan commitment fees  
received by NHI are amortized into income by the interest method                
over the expected period of the related loans.  In the event that               
a potential borrower chooses not to borrow funds from NHI, the                  
related commitment fees are recognized into income when the                     
commitment expires.                                                             

In management's opinion, these loan commitment fees         
approximate the loan commitment fees that NHI would currently                   
charge to enter into similar agreements based on the terms of the               
agreements and the creditworthiness of the parties and the                      
committed interest rates are approximately the same as current                  
levels of interest rates.                                                       

Rental Income - Rental income is recognized by NHI based on 
the terms of NHI's leases.                                                      

Mortgage Interest Income - Mortgage interest income is      
recognized by NHI based on the interest rates and principal                     
amounts outstanding of the mortgage notes receivable.                           

NOTE 3. REAL ESTATE PROPERTIES                                                  

The following table summarizes NHI's real estate properties           
by type of facility and by state as of December 31, 1996:                       

                                                                · Download Table

                                              Buildings,                        
                               Number       Improvements &              Mortgage
                                 of          Construction   Accumulated   Notes 
Facility Type and State      Facilities Land  in Progress  Depreciation  Payable
-----------------------      ---------- ----  -----------  ------------  -------
(Dollar amounts in thousands)                                                   

LONG-TERM CARE:                                                                 
                                                                                
Alabama                          2   $    95      $  5,165      $ 1,047  $   524
Arizona                          1       453         4,558           47    3,136
Florida                          4     1,949        28,301        4,372   13,753
Georgia                          1        52           865          345      168
Idaho                            2       365         6,824           71      ---
Kentucky                         3       201         2,591          850      ---
Missouri                         5     1,070        21,860        4,421   16,962
South Carolina                   3       572         9,953        2,781    7,483
Tennessee                       21     2,118        31,037        9,101   12,851
Virginia                         1       176         2,511          549    3,835
Total Long-Term Care            43     7,051       113,665       23,584   58,712

ACUTE CARE:                                                                     

Kentucky                         1       540         6,961          899      ---
Total Acute Care                 1       540         6,961          899      ---

MEDICAL OFFICE BUILDINGS:                                                       

Florida                          1       170         3,349          434      ---
Kentucky                         1        23         3,667          446      ---
Louisiana                        1       ---         3,153          384      ---
Texas                            1       631         6,248          539      ---
Utah                             1       223         6,541          789      ---
Total Medical Office Bldgs.      5     1,047        22,958        2,592      ---

ASSISTED LIVING:                                                                

Florida                          2     5,089        20,725          269      ---
New Jersey                       1     4,229        13,030          176      ---
Texas                            1     2,094         9,091          115      ---
Total Assisted Living            4    11,412        42,846          560      ---

RETIREMENT CENTERS:                                                             

Missouri                         1       354         3,181          619      ---
Tennessee                        2        64         3,071          641    1,296
Total Retirement Centers         3       418         6,252        1,260    1,296

Total                           56   $20,468      $192,682      $28,895  $60,008

NOTE 4. MORTGAGE AND OTHER NOTES RECEIVABLE                                     

The following is a summary of mortgage and other notes                
receivable by type:                                                             

                    December 31,
                 1996           1995
Mortgage loans           $505,275,000   $453,538,000        
Construction loans         10,191,000     12,263,000        
Term loans                  3,763,000      3,827,000        
                 $519,229,000   $469,628,000

The following is a summary of the terms and amounts of                
mortgage and other notes receivable at December 31, 1996:                       

                                                        · Enlarge/Download Table

             Final       Number of                                         Principal      
          Payment Date    Loans        Payment Terms                         Amount       
          ------------   ---------    -------------                        ---------      
                                                                                          
First Mortgage Notes:                                                                     

            1999            1      Monthly payments of $258,000, which                    
                                   include interest at 11%.                   $ 26,000,000

            2000            2      Monthly payments of $1,344,000, and                    
                                   $40,000, which include interest at 10.75%              
                                   and 11.93%, respectively.  Contingent                  
                                   interest related to the greater of a                   
                                   percentage of the facilities' annual                   
                                   increase in revenue over a base year or                
                                   the percentage increase in the Consumer                
                                   Price Index over a base year is paid                   
                                   annually.                                   138,704,000

            2000            1      Loan participation agreement with                      
                                   SouthTrust Bank acquiring a 43.9%                      
                                   interest in 12 mortgage notes.                         
                                   Monthly payments of $166,000, which                    
                                   include interest at 8.66% to 8.74%.          19,666,000

            2000            1      Monthly payments of $116,000 which include             
                                   interest at 10.75%.  Contingent interest               
                                   related to the greater of a percentage of              
                                   the facilities' annual increase in revenue             
                                   over a base year or the percentage increase            
                                   in the Consumer Price Index over a base                
                                       year is paid annually.                   12,062,000

            2002            1      Monthly payments of $132,000, which                    
                                   include interest at 10.5%.  Contingent                 
                                   interest related to a percentage of                    
                                   the facility's annual increase in revenue              
                                   over a base year is paid annually.           13,252,000

            2002            1      Monthly principal payments of                          
                                   $214,000 plus interest at 12%.  Contingent             
                                   interest related to a percentage of the                
                                   facility's annual increase in revenue                  
                                   over a base year is paid annually.           13,707,000

            2003            1      Monthly payments of $98,000, which                     
                                   include interest at 11%.  Contingent                   
                                   interest related to the increase in                    
                                   certain lease payments of the facilities               
                                   over a base year are paid annually.           9,722,000

            2003            1      Monthly interest payments of $240,000, at              
                                   10% through April 1998. Beginning May 1998             
                                   monthly payments of principal and interest             
                                   of $294,000, which include interest at 10%.  28,834,000

            2003            1      Monthly payments of $103,000, which include            
                                   interest at 10.75%.  Effective October, 1998,          
                                   the monthly payments will be adjusted to               
                                   include interest at the greater of 10.75%              
                                   or the rate that ten-year United States                
                                   securities yield plus 4.5%.  Contingent                
                                   interest related to a percentage of the                
                                   facility's annual increase in revenue over             
                                   a base year is paid annually.                12,035,000

            2004            1      Monthly payments of $149,000, which                    
                                   include interest at 11%.  Effective                    
                                   October, 2000, the monthly payments will               
                                   be adjusted to include interest at the                 
                                   greater of 11% or the rate that ten-year               
                                   United States Securities yield plus 5%.                
                                   Contingent interest related to the greater             
                                   of a percentage of the facilities' annual              
                                   increase in revenue over a base year or the            
                                   percentage increase in the Consumer Price              
                                   Index over a base year is paid annually.     14,727,000

            2004            1      Monthly payments of $180,000, which                    
                                   include interest at 10.5%.  Effective                  
                                   April, 1999, the monthly payments will                 
                                   be adjusted to include interest at the                 
                                   greater of 10.5% or the rate that ten-year             
                                   United States securities yield plus 5%.                
                                   Contingent interest related to the greater             
                                   of a percentage of the facilities' annual              
                                   increase in revenues over a base year or               
                                   the percentage increase in the Consumer                
                                   Price Index over a base year will                      
                                   be paid annually beginning in 1997.          18,640,000

            2005            1      Monthly payments of $98,000, which includes            
                                   interest at 11.35%.  The interest rate                 
                                   escalates annually by .1% per year.                    
                                   Contingent interest related to a percentage            
                                   of the facility's annual increase in revenue           
                                   over a base year is due annually.             9,545,000

            2006            1      Monthly interest payments of $222,000 at               
                                   10.25%.  Effective January 1997 and 1998,              
                                   the rates will be adjusted to 10.75% and               
                                   10.5%, respectively.  Effective January,               
                                   1999, the monthly payment will be adjusted             
                                   annually to include principal and interest             
                                   at a rate equal to .15% above the previous             
                                   year's rate.                                 22,896,000

            2011            1      Monthly interest payments of $229,000 at               
                                   10.5%.  Effective August, 1997 and annually            
                                   thereafter, the interest rate will be in-              
                                   creased by .15%.  Principal on the loan                
                                   is due at maturity.                          25,805,000

        1997 to 2006       28      Monthly payments from $5,000 to $87,000,               
                                   which include interest at 9.875% to 15.00%.            
                                   Principal outstanding ranges from $202,000             
                                   to $8,591,000.                              121,843,000

            2010            1      Monthly payments of $182,000, which include            
                                   interest at 11.35%.  The interest rate will            
                                   escalate .1% per year through September 1,             
                                   2005, the anniversary date of the note. Effec-         
                                   tive September 1, 2005, the monthly payment            
                                   will be adjusted to include interest at the            
                                   greater of 12.25% or the rate that five-year           
                                   United States securities yield plus 4.5%.    17,837,000

              Construction Loans:                                                         
            2006            5      Monthly payments of interest only                      
                                   at the rates of 10.50% to 11.25% during                
                                   construction.  Construction notes will convert         
                                   to mortgage notes at close of construction.            
                                   The notes provide for interest escalation at           
                                   various anniversary dates of the note.                 
                                   Contingent interest related to a                       
                                   percentage of the facilities' annual                   
                                   increase in revenue over a base year                   
                                   will be paid annually beginning during the             
                                   term of the mortgage loan.                   10,191,000

              Term Notes:                                                                 

            2019            3      Monthly payments of $29,000, which                     
                                   include interest at the rate of                        
                                   7.5%.                                         3,763,000
                                                                               -----------
                                                                              $519,229,000
                                                                               ===========

The mortgage notes receivable are generally first mortgage            
notes secured by the real estate of long-term health care                       
centers, acute care hospitals, medical office buildings, assisted               
living facilities and retirement centers in the states of                       
Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Kansas,                    
Kentucky, Louisiana, Maryland,  Missouri, New Hampshire, North                  
Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas,                 
Virginia, Washington, and West Virginia.  Construction loans are                
for the construction of three nursing homes located in Colorado                 
and Florida, one retirement center in Texas, and one assisted                   
living facility in Florida.  NHI has agreed to provide permanent                
financing for the projects upon completion of the construction.                 

The mortgage notes receivable are secured by first mortgages          
on the real property and UCC liens on the personal property of                  
the facilities.  Certain of the notes receivable are also secured               
by guarantees of significant parties and by cross-                              
collateralization on properties with the same respective owner.                 

NOTE 5. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS                   

The following methods and assumptions were used to estimate           
the fair value of each class of financial instruments for which                 
it is practicable to estimate that value:                                       

Mortgage and other notes receivable - The fair value of               
NHI's mortgage and other notes receivable is estimated based on                 
the current rates offered by NHI and other real estate investment               
trusts and financial institutions for the same or similar types                 
of mortgage and other notes receivable of the same or similar                   
maturities.                                                                     

Investments in real estate mortgage investment conduits -             
The fair value of NHI's investments in real estate mortgage                     
investment conduits is estimated based on the present value of                  
the estimated cash flows discounted at a risk-free rate.                        

Interest and rent receivable - The carrying amount                    
approximates fair value because of the short term nature of these               
receivables.                                                                    

Cash and cash equivalents - The carrying amount approximates          
fair value because of the short maturity of these instruments.                  

Long-term debt and credit facilities - The fair value of              
NHI's long-term debt and credit facilities is estimated based on                
the current rates offered to NHI and other real estate investment               
trusts for debt of the same remaining maturities.  The fair value               
of the debt transferred from NHC to NHI is estimated to                         
approximate the carrying value of the debt as NHC is obligated to               
pay NHI debt service rent.                                                      

Convertible subordinated debentures - The fair value of               
NHI's 1995 debentures, 1993 debentures and senior debentures is                 
estimated based on the quoted market prices of the debentures.                  

The estimated fair values of NHI's financial instruments are          
as follows:                                                                     

                                                                · Download Table

                              December 31, 1996        December 31, 1995    
                              Carrying    Fair         Carrying    Fair     
                               Amount     Value         Amount     Value    
                                 (in thousands)           (in thousands)    
                                                                            
Mortgage and other                                                          
   notes receivable           $ 519,229 $ 519,229      $ 469,628  $ 469,628 
Investments in real estate mort-                                            
   gage investment conduits      36,562    36,562         38,140     38,140 
Interest and rent receivable      5,382     5,382          6,061      6,061 
Cash and cash equivalents         3,400     3,400          2,122      2,122 
Long-term debt and credit                                                   
   facilities                  (219,008) (219,008)      (172,853)  (172,853)
Convertible subordinated                                                    
   debentures                   (90,735) (106,311)       (82,316)   (89,514)

NOTE 6. INVESTMENTS IN REAL ESTATE MORTGAGE INVESTMENT CONDUITS                 

On December 29, 1995, NHI purchased for $6,158,000 a                  
participating interest in a real estate mortgage investment                     
conduit ("REMIC") in the form of one class of certificates issued               
in the aggregate principal amount of $146,104,000 ("the 1995                    
REMIC").  On November 9, 1993, NHI purchased for $34,196,000 a                  
participating interest in a REMIC in the form of nine classes of                
certificates issued in the aggregate principal amount of                        
$172,928,000 ("the 1993 REMIC").  Both of the REMICs represent                  
the entire beneficial ownership interest in a trust fund.  Each                 
trust fund consists of pools of mortgage loans, each secured by a               
first lien on a property which is used in providing long-term                   
nursing care and certain other assets.                                          

A portion of the 1993 REMIC certificates are interest-only            
certificates and entitle NHI to receive cash flow designated as                 
interest.  Principal and interest distributions on other                        
certificates purchased by NHI are subordinated to distributions                 
of principal and interest with respect to certain other classes                 
of certificates.                                                                

Pursuant to Statement of Financial Accounting Standards No.           
115, "Accounting for Certain Investments in Debt and Equity                     
Securities" ("SFAS 115"), NHI has classified its investments in                 
the certificates as held-to-maturity debt securities.                           
Accordingly, the investments in the certificates have been                      
recorded at the amortized cost in NHI's financial statements.                   
The effective yields, as calculated, have been used to accrue                   
income based on actual and projected future cash flows that                     
reflect actual and assumed mortgage prepayments and interest                    
rates.  At the end of each future fiscal quarter, the effective                 
yield of the certificates will be recalculated by NHI based on                  
actual cash payments received and revised cash flow projections                 
that reflect updated assumptions about interest rates and                       
prepayment rates.  The carrying value of the certificates will be               
adjusted by NHI at the end of each future quarter as if the new                 
effective yield had been applied since the purchase of the                      
certificates, and the cumulative effect of this adjustment will                 
be reflected in operations in the period the adjustment is made.                

At December 31, 1996, the effective yields have been                  
calculated by NHI to be 10.9% and 11.0%, respectively, on the                   
1995 REMIC and the 1993 REMIC and the average remaining lives of                
the mortgages are calculated to be 8.9 years and 6.3 years,                     
respectively.                                                                   

NOTE 7. DEBT                                                                    

Short-Term Borrowings - During April, 1995, NHI repaid in             
full its $85,000,000 short-term unsecured credit agreement.  As                 
of December 31, 1996 and 1995, there were no short-term                         
borrowings outstanding.                                                         

Long-Term Debt - Long-term debt, including refinancing                
commitments, consists of the following:                                         

                                                        · Enlarge/Download Table


                                                   Weighted Average    Final               Principal            
                                                   Interest Rate   Maturities               Amount              
                                                   -------------   ----------  -------------------------------- 
December 31                                                                        1996                1995     
                                                                                                                
          Bank credit facility, principal and         Variable,                                                 
               interest payable quarterly               6.0%          2009     $ 24,493,000        $ 25,590,000 

          Senior secured notes, principl and interest                                                           
               payable semiannually                     8.4           2005       16,490,000          18,928,000 

          Senior secured notes, principal and interest                                                          
               payable semiannually                     8.3           2003        1,077,000             534,000 

          Senior unsecured credit agreement, payable                                                            
               in periodic installments of            Variable,                                                 
               principal and interest                   6.9           1999       59,000,000          31,750,000 

          Senior unsecured term loan, payable in                                                                
               periodic installments of               Variable,                                                 
               principal and interest                   6.7           2001      100,000,000                 --- 

          Bank loans, repaid in 1996                   ---             ---              ---          75,000,000 

          First mortgage notes, principal payable in                                                            
               periodic installments, interest                                                                  
               payable monthly                          5.0          2017           746,000           3,435,000 

          First mortgage revenue bonds, principal                                                               
               payable in periodic installments,      Variable,                                                 
               interest payable monthly                 4.1        2000-2014      17,202,000          17,616,000
                                                                                 -----------         -----------
                                                                                $219,008,000        $172,853,000
                                                                                 ===========         ===========

NHI has established a senior unsecured revolving line of    
credit which allows it to borrow a maximum of $100,000,000.  The                
agreement allows NHI to borrow up to two-thirds of its borrowing                
base, which consists primarily of NHI's mortgage notes receivable               
and REMIC investments.  The loan bears interest at the prime rate               
or at a premium over the LIBOR ("The London Interbank Offered                   
Rate") at the option of NHI.  The loan matures in June 1999.  The               
amount outstanding at December 31, 1996 is $59,000,000.                         

In August 1996, NHI entered into a $100,000,000 senior      
unsecured term loan.  The loan bears interest at the prime rate                 
or at a premium over LIBOR.  The loan agreement requires that the               
principal be repaid in four equal installments of $25,000,000                   
annually beginning August 15, 1998 and maturing August 15, 2001.                

On October 11, 1995 and April 28, 1995, NHI entered into two
five-year interest rate swap agreements.  Pursuant to these                     
agreements, NHI has exchanged its variable rate interest rate                   
obligations on a $50,000,000 notional principal amount for a                    
weighted average fixed rate obligation of 7.6% per annum.                       

Interest rate swap agreements are used to reduce the        
potential impact of increases in interest rates on variable rate                
long-term debt.  The fair value of the swap agreements are not                  
recognized in the consolidated financial statements as they are                 
accounted for as hedges.  Amounts payable under such agreements                 
are accrued as an increase in interest expense.  NHI is exposed                 
to credit losses in the event of nonperformance by the                          
counterparties to these agreements.  NHI anticipates, however,                  
that counterparties will be able to fully satisfy their                         
obligations under the contracts.  NHI does not obtain collateral                
or other security to support these agreements subject to credit                 
risk but does monitor the credit standing of counterparties.                    

Substantially all real estate property and certain mortgage 
notes receivable are either pledged as collateral on the long-                  
term debt or are subject to a negative pledge.                                  

The debt identified above as senior secured notes is cross- 
defaulted with other NHC liabilities and is cross-collateralized                
to the extent of approximately $24,397,000 of debt.  Thus, in the               
event NHC defaulted on its obligations under its debt packages,                 
NHI could lose its interest in the related mortgage notes                       
receivable or real estate properties.                                           

The aggregate principal maturities of all long-term debt,   
including refinancing commitments, for the five years subsequent                
to December 31, 1996 are as follows:                                            

1997                               $  4,158,000   
1998                                 29,299,000   
1999                                 88,219,000   
2000                                 29,531,000   
2001                                 29,586,000   

Certain loan agreements require maintenance of specified    
operating ratios as well as specified levels of working capital                 
and stockholders' equity by NHI and NHC.  All such covenants have               
been met by NHI, and NHI believes all such covenants have been                  
met by NHC.                                                                     

NOTE 8. CONVERTIBLE SUBORDINATED DEBENTURES                                     

1995 Debentures -  On December 12, 1995, NHI sold           
$45,000,000 of a total of $100,000,000 of 7.75% convertible                     
subordinated debentures (the "1995 debentures") due on January 1,               
2001.  The remaining $55,000,000 were sold on January 15, 1996.                 
At December 31, 1996, 1995 debentures in the amount of                          
$74,894,000 were outstanding.                                                   

The 1995 debentures are convertible at the option of the    
holder into common stock of NHI at a conversion price of $31.625,               
subject to adjustment.  During 1996, $25,106,000 of the 1995                    
debentures were converted into 793,861 shares of common stock.                  
NHI has reserved an additional 2,368,190 shares of common stock                 
for 1995 debenture conversions.                                                 

The 1995 debentures will not be redeemable prior to maturity
except in the event of certain tax-related events or to the                     
extent necessary to preserve and protect NHI's status as a real                 
estate investment trust.  The debentures are subordinated in                    
right of payment to the prior payment in full of all senior                     
indebtedness of the Company.  Interest is payable semiannually on               
January 1 and July 1 of each year.                                              

1995 Debt Service Debentures - In November 1995, NHI began  
offering 7% subordinated convertible debentures due on January 1,               
2006.  NHI may offer up to $25,000,000 of these debentures to                   
current and future mortgagees and lessees of NHI to satisfy                     
existing debt service reserve escrow requirements under                         
applicable mortgages or leases.  At December 31, 1996, debentures               
in the amount of $6,406,000 have been issued.  The debentures are               
convertible at the option of the holder into common stock of NHI                
at a conversion price of 110% of the market price on the date of                
issuance of the debentures, subject to adjustment.  At December                 
31, 1996, none of the debentures have been converted.  Interest                 
is payable semiannually on April 1 and October 1 of each year.                  

1993 Debentures - On March 25, 1993, NHI issued $112,210,000
of 7.375% convertible subordinated debentures (the "1993                        
debentures") due on April 1, 1998.  At December 31, 1996, 1993                  
debentures in the amount of $9,135,000 were outstanding.                        

The 1993 debentures are convertible at the option of the    
holder into common stock of NHI at a conversion price of $27.25                 
per share, subject to adjustment.  During 1996 and 1995,                        
$22,700,000  and $64,379,000,  respectively, of the 1993                        
debentures were converted into 833,005 shares and 2,362,517                     
shares, respectively, of common stock.  NHI has reserved an                     
additional 335,229 shares of common stock for 1993 debenture                    
conversions.                                                                    

The 1993 debentures are redeemable by NHI in whole or in    
part at any time upon payment of 100% of the principal amount and               
accrued interest to the date fixed for redemption.  The 1993                    
debentures are subordinated in right of payment to all principal                
and interest on existing secured indebtedness.  Interest is                     
payable semiannually on April 1 and October 1 of each year.                     

Senior Debentures - On October 17, 1991, NHI issued         
$110,000,000  of 10% senior convertible subordinated debentures                 
(the "senior debentures") due 2006.  At December 31, 1996, senior               
debentures in the amount of $300,000 were outstanding.                          

The senior debentures are convertible at the option of the  
holder into NHI's common stock at a price of $20 per share,                     
subject to adjustment.  In 1996 and 1995, $1,510,000  and                       
$4,816,000,  respectively, of the senior debentures were                        
converted into 75,500  and 240,800 shares, respectively, of                     
common stock.  NHI has reserved an additional 15,000 shares of                  
common stock for senior debenture conversions.                                  

The remaining senior debentures are redeemable at any time  
at the option of NHI, initially at 103% of the principal amount                 
and thereafter at prices declining to 100% of such principal                    
amount on and after October 17, 1999, together with accrued                     
interest.                                                                       

On October 15 in each of the years 2002, 2003, 2004 and     
2005, NHI will redeem 10% of the then outstanding aggregate                     
principal amount of the senior debentures at a price equal to                   
100% of the principal amount.  All remaining principal and                      
interest shall be paid on October 17, 2006.                                     

The senior debentures rank equally with other unsecured debt
of NHI (other than the trade debt) but are subordinated to all                  
existing and secured indebtedness.  NHI may not incur or                        
guarantee unsecured indebtedness which is senior in right of                    
payment to the senior debentures.  Interest at 10% is payable                   
semiannually on January 1 and July 1 of each year.                              

NOTE 9.  COMMITMENTS AND GUARANTEES                                             

At December 31, 1996, NHI was committed, subject to due     
diligence and financial performance goals, to fund approximately                
$106,033,000  in health care real estate projects, of which                     
amount, approximately $66,133,000 is expected to be funded within               
the next 12 months.  The commitments include mortgage loans for                 
five long-term health care centers, two medical office buildings,               
one retirement center and 13 assisted living facilities, all at                 
rates ranging from 10% to 12%.  Also included in the $106,033,000               
of commitments is a $18,600,000 commitment on a loan secured by                 
first mortgages on 43 long-term care centers.  Draws on the                     
$18,600,000  commitment are limited to $3,700,000  annually.                    

In addition to the above commitments, NHI has entered into  
agreements to loan up to $18,900,000 in 1997 in connection with                 
the early purchase of loans.                                                    

In order to obtain the consent of appropriate lenders to    
NHC's transfer of assets to NHI, NHI guaranteed certain debt                    
($24,397,000 at December 31, 1996) of NHC.  The debt is at fixed                
interest rates with a weighted average interest rate of 8.4% at                 
December 31, 1996.  NHI receives from NHC compensation of                       
approximately $121,986 per annum for the guarantees which is                    
credited against NHC's base rent requirements.                                  

In management's opinion, these guarantee fees approximate   
the guarantee fees that NHI would currently charge to enter into                
similar guarantees.                                                             

All of the guaranteed indebtedness discussed above is       
secured by first mortgages and rights which may be enforced if                  
either party is required to pay under their respective                          
guarantees.  NHC has agreed to indemnify and hold harmless NHI                  
against any and all loss, liability or harm incurred by NHI as a                
result of having to perform under its guarantee of any or all of                
the guaranteed debt.                                                            

Additionally, NHI has outstanding letters of credit totaling
$11,253,000.  NHI also has guaranteed bank loans in the amount of               
$1,948,000 to key employees and directors utilized for the                      
exercise of stock options.  All shares of NHI stock purchased                   
with the proceeds of the guaranteed loans are held as collateral                
by NHI and the loans are limited to $100,000 per individual per                 
year.  NHI's potential accounting loss related to these                         
guaranteed bank loans, if all collateral failed, is the face                    
amount of the guaranteed loans outstanding.                                     

NOTE 10.  CUMULATIVE CONVERTIBLE PREFERRED STOCK                                

In February and March, 1994, NHI issued $109,558,000 of 8.5%
Cumulative Convertible Preferred Stock ("Preferred Stock") with a               
liquidation preference of $25 per share.  Dividends at an annual                
rate of $2.125 are cumulative from the date of issuance and are                 
paid quarterly.                                                                 

The Preferred Stock is convertible into NHI common stock at 
the option of the holder at any time at a conversion price of                   
$27.625 per share of common stock, which is equivalent to a                     
conversion rate of 0.905 per share of common stock for each share               
of Preferred Stock, subject to adjustment in certain                            
circumstances.                                                                  

The Preferred Stock is not redeemable by NHI prior to       
February 15, 1999 and is not redeemable for cash.  On or after                  
February 15, 1999, the Preferred Stock will be redeemable by NHI                
for common stock.  NHI may redeem the Preferred Stock only if the               
trading price of the common stock on the New York Stock Exchange                
("NYSE") exceeds $27.625 per share for 20 trading days within a                 
period of 30 trading days prior to the exercise.                                

At December 31, 1996, 1,050,122  shares of the preferred    
stock, which are convertible into 950,360 shares of common stock,               
are outstanding.  During 1996 and 1995, respectively, 1,261,411                 
and 1,491,427 shares of preferred stock were converted into                     
1,141,493 and 1,349,681 shares of common stock.  NHI has reserved               
950,360 shares of common stock for Preferred Stock conversions.                 

The Preferred Stock is listed on the NYSE under the symbol  
"NHIPr".                                                                        

NOTE 11.  COMMON STOCK OFFERINGS                                                

On May 23, 1995, NHI sold, in a public equity offering,     
1,900,000 shares of common stock at a price of $26.75 per share.                
Net proceeds to the Company from the sale were approximately                    
$48,000,000.                                                                    

On July 26, 1995, NHI sold, in a private placement, 577,000 
shares of common stock at a price of $28.25 per share.  Net                     
proceeds to the Company from the sale were $16,300,000.                         

NOTE 12. STOCK OPTION PLAN                                                      

NHI has stock option plans which provide for the granting of
options to key employees and directors of NHI to purchase shares                
of common stock at a price no less than the market value of the                 
stock on the date the option is granted.  The options may be                    
exercised immediately, but the Company may purchase the shares at               
the grant price if employment is terminated prior to six years                  
from the date of grant.  The maximum term of the options is five                
years.  The following table summarizes option activity:                         

                                            Weighted Average
                             Number of      Exercise
Options Outstanding               Shares         Price      
-------------------              ---------  ----------------
Outstanding December 31, 1993    114,000         $24.91     
Options granted                    3,000          28.75     
Options exercised                 22,000          25.00     
Outstanding December 31, 1994     95,000          25.01     
Options granted                  115,000          25.92     
Options exercised                 53,209          25.09     
Outstanding December 31, 1995    156,791          25.65     
Options granted                   15,000          33.50     
Options exercised                 71,079          25.75     
Outstanding December 31, 1996    100,712         $26.75     

At December 31, 1996, all options outstanding are           
exercisable.  Exercise prices on the exercisable options range                  
from $25.00 to 33.50.  The weighted average remaining contractual               
life of options outstanding at December 31, 1996 is 2.75 years.                 
NHI has reserved 251,712 shares of common stock for issuance                    
under the stock option plan.                                                    

In October 1995, the Financial Accounting Standards Board   
issued Statement of Financial Accounting Standards No. 123,                     
"Accounting for Stock-Based Compensation ("SFAS 123").  SFAS 123                
establishes new financial accounting and reporting standards for                
stock-based compensation plans.  NHI has adopted the disclosure-                
only provisions of SFAS 123.  As a result, no compensation cost                 
has been recognized for NHI's stock option plans.  Based on the                 
number of options outstanding and the historical and expected                   
future trends of factors affecting valuation of those options,                  
management believes that any compensation cost attributable to                  
options granted is immaterial.                                                  

NOTE 13. LIMITS ON COMMON STOCK OWNERSHIP                                       

On October 16, 1996, the NHI Board of Directors, pursuant to
powers granted by the Company's charter, changed the limit on the               
percentage of ownership which any person may have in the                        
outstanding common stock of the Company from a limit of 7.0% to a               
limit of 9.9%.  The limit on ownership of any other class of                    
stock (including issues convertible into common stock) remains at               
9.9% of the outstanding stock.                                                  

This limit is a provision of the Company's charter and is   
necessary in order to reduce the possibility of the Company's                   
failing to meet the stock ownership requirements for REIT                       
qualification under the Internal Revenue Code.  The changing of                 
the limit to 9.9% of the outstanding common stock is made                       
possible by the increase in the number of authorized and issued                 
common shares of the Company since its inception in October 1991.               

NOTE 14. SUPPLEMENTAL CASH FLOW INFORMATION                                     

Supplemental disclosure of cash flow information is as      
follows:                                                                        

                                                                · Download Table

(in thousands, except share amounts)                                        
Year Ended December 31                1996           1995           1994    
                                    ---------      -------       ---------  
                                                                            
Cash payments for interest                                                  
   expense                         $   15,530     $ 29,199      $   20,721  
During 1996, 1995 and 1994,                                                 
          $49,316,000,$69,195,000 and                                       
          $18,773,000, respectively,                                        
          of convertible subordinated                                       
          debentures were converted                                         
          into 1,702,366 shares, 2,603,317                                  
          shares and 739,157 shares,                                        
          respectively, of NHI's common                                     
          stock:                                                            
               Convertible subordinated                                     
                 debentures        $ (49,316)     $(69,195)      $  (18,773)
               Financing costs     $     866      $  1,177       $      477 
               Accrued interest    $    (719)     $   (659)      $     (161)
               Common stock        $      18      $     27       $        7 
               Capital in excess                                            
                 of par value      $  49,151         $ 68,650    $   18,450 

NOTE 15.  EARNINGS PER SHARE                                                    

Primary earnings per share is based on the weighted average 
number of common and common equivalent shares outstanding.                      
Common equivalent shares result from the dilutive effect of stock               
options computed using the treasury stock method.  Net income is                
reduced by dividends to holders of cumulative convertible                       
preferred stock.                                                                

Fully diluted earnings per share assumes the conversion of  
convertible subordinated debentures, the conversion of cumulative               
convertible preferred stock and the exercise of all stock options               
using the treasury stock method.  Net income is increased for                   
interest expense on the convertible subordinated debentures.                    

The following table summarizes the average number of common 
shares and the net income used in the calculation of primary and                
fully diluted earnings per share:                                               

                                                                · Download Table

Year Ended December 31           1996          1995        1994          
                                                                         
PRIMARY:                                                                 
  Weighted average common                                                
     shares                      21,916,921   16,381,826      13,236,205 
  Stock options                      21,710       14,577           9,316 
  Average common shares                                                  
    outstanding                  21,938,631   16,396,403      13,245,521 

  Net income                    $67,164,000  $49,692,000     $38,880,000 
  Dividends paid to preferred                                            
    stockholders                 (3,118,000)  (6,613,000)     (7,729,000)
  Net income available to                                                
    common stockholders         $64,046,000  $43,079,000     $31,151,000 
  Net income per common share   $      2.92  $      2.63     $      2.35 

FULLY DILUTED:                                                           
  Weighted average common                                                
     shares                      21,916,921   16,381,826      13,236,205 
  Stock options                      29,580       35,419           9,316 
  Convertible subordinated                                               
    debentures                    3,882,060    3,476,998       4,272,167 
  Cumulative convertible pre-                                            
    ferred stock                  1,407,091    2,928,399       3,321,508 
  Average common shares                                                  
     outstanding                 27,235,652   22,822,642      20,839,196 

  Net income                    $67,164,000  $49,692,000     $38,880,000 
  Interest expense on convertible                                        
    subordinated debentures       9,184,000    7,057,000       8,629,000 
  Net income assuming conversion                                         
    of subordinated convertible                                          
    debentures to common stock  $76,348,000  $56,749,000     $47,509,000 
  Net income per common share   $      2.80  $      2.49     $      2.28 

NOTE 16. DIVIDENDS                                                              

Dividend payments by NHI to its common stockholders are     
characterized in the following manner for tax purposes in 1996:                 

                                                                · Download Table


Dividend         Taxable                     Non-Taxable          
Payment        as Ordinary     Taxable as     Return of           
  Date           Income       Capital Gains    Capital      Totals
                                                                  
Feb. 9, 1996     $ .70            $---          $---        $ .70 
May 10, 1996       .70             ---           ---          .70 
Aug. 9, 1996       .70             ---           ---          .70 
Nov. 11, 1996      .70             ---           ---          .70 
                 $2.80            $---          $---        $2.80 

NOTE 17. RELATIONSHIP WITH NATIONAL HEALTHCARE L.P.                             

Leases - On October 17, 1991, concurrent with NHC's         
conveyance of real property to NHI, NHI leased to NHC 40 long-                  
term care facilities and three retirement centers.  Each lease is               
for an initial term expiring December 31, 2001, with two                        
additional five-year renewal terms at the option of NHC, assuming               
no defaults.  NHI accounts for its leases as operating leases.                  

During the initial term of the first renewal term, NHC is   
obligated to pay annual base rent on all 43 facilities of                       
$15,238,000.  If NHC exercises its option to extend the leases                  
for a second renewal term, the base rent will be the then fair                  
rental value as negotiated by NHI and NHC.                                      

The leases also obligate NHC to pay as debt service rent all
payments of interest and principal due under each mortgage to                   
which the conveyance of the facilities was subject.  The payments               
are required over the remaining life of the mortgage as of the                  
conveyance date.                                                                

In addition to base rent and debt service rent, in each year
after 1992, NHC must pay percentage rent to NHI equal to 3% of                  
the amount by which gross revenues of each facility in such later               
year exceeds the gross revenues of such facility in 1992.                       

Each lease with NHC is a "triple net lease" under which NHC 
is responsible for paying all taxes, utilities, insurance premium               
costs, repairs and other charges relating to the ownership of the               
facilities.  NHC is obligated at its expense to maintain adequate               
insurance on the facilities' assets.                                            

NHC has a right-of-first refusal with NHI to purchase any of
the initial properties transferred from NHC should NHI receive an               
offer from an unrelated party during the term of the lease or up                
to 180 days after termination of the related lease.                             

Rental income was $34,579,000 ($26,910,000 from NHC) in     
1996; $32,061,000 ($27,618,000 from NHC) in 1995; and $27,345,000               
($24,399,000 from NHC) in 1994.                                                 

At December 31, 1996, the future minimum lease payments to  
be received by NHI under its operating leases, including debt                   
service payments which are based on interest rates in effect at                 
December 31, 1996, are as follows:                                              

            NHC           Others         Total
1997           $25,524,000    $ 9,976,000    $35,500,000    
1998            25,604,000     10,045,000     35,649,000    
1999            25,596,000     10,117,000     35,713,000    
2000            25,622,000     10,190,000     35,812,000    
2001            25,630,000     10,266,000     35,896,000    
Thereafter         -0-        103,835,000    103,835,000    

Advisory Agreement - NHI has entered into an Advisory       
Agreement with NHC whereby services related to investment                       
activities and day-to-day management and operations are provided                
to NHI by NHC.  As Advisor, NHC is                                              
subject to the supervision of and policies established by NHI's                 
Board of Directors.                                                             

Either party may terminate the Advisory Agreement on 90 days
notice at any time.  NHI may terminate the Advisory Agreement for               
cause at any time.                                                              

For its services under the Advisory Agreement, the Advisor  
is entitled to annual compensation of $3,101,000 in 1996                        
($2,827,159 in 1995 and $2,574,975 in 1994).  The annual                        
compensation is  reduced by any compensation paid by NHI to its                 
executive officers, if any.  However, the payment of such annual                
compensation is conditional upon NHI having funds from operations               
sufficient to enable NHI to pay annual dividends of $2.00 per                   
common share and upon NHI paying such dividends.  Funds from                    
operations                                                                      
is defined for these purposes as net income, plus depreciation                  
and amortization, less the effect of any capital gains or losses                
included in such net income.  Increases in compensation to NHC                  
under the Advisory Agreement are proportional to increases in                   
NHI's funds from operations per common share as defined above.                  

NOTE 18. PRIOR YEAR RECLASSIFICATIONS                                           

Certain reclassifications have been made to the 1994 and    
1995 financial statements to conform to the 1996 presentation.                  

NOTE 19.  EVENT SUBSEQUENT TO YEAR END (UNAUDITED)                              

On January 29, 1997, NHI sold $60,000,000 of 7% convertible 
subordinated debentures due on February 1, 2004.  The debentures                
are convertible at the option of the holder into common stock at                
a conversion price of $37.50, subject to adjustment.  The                       
debentures will not be redeemable prior to February 8, 2002                     
except in the event of certain tax-related events or to the                     
extent necessary to preserve and protect NHI's status as a real                 
estate investment trust.  The debentures are subordinated in                    
right of payment to the prior payment in full of all senior                     
indebtedness of NHI.  Interest is payable semiannually on                       
February 1 and August 1 of each year.                                           

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT                 
SCHEDULES                                                                       

To National Health Investors, Inc.:                                             

We have audited, in accordance with generally accepted auditing                 
standards, the financial statements included in National Health                 
Investors, Inc.'s Annual Report to Stockholders incorporated by                 
reference in this Form 10-K, and have issued our report thereon                 
dated January 11, 1997.  Our audits were made for the purpose of                
forming an opinion on the basic financial statements taken as a                 
whole.  The financial statement schedules listed in the                         
accompanying index are the responsibility of the Company's                      
management and are presented for purposes of complying with the                 
Securities and Exchange Commission's rules and regulations under                
the Securities and Exchange Act of 1934 and are not otherwise a                 
required part of the basic financial statements.  The financial                 
statement schedules have been subjected to the auditing                         
procedures applied in the audits of the basic financial                         
statements and, in our opinion, fairly state in all material                    
respects the financial data required to be set forth therein in                 
relation to the basic financial statements taken as a whole.                    

ARTHUR ANDERSEN LLP                                                             

Nashville, Tennessee                                                            
March 5, 1997                                                                   

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                             NATIONAL HEALTH INVESTORS, INC.                                                        
                 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION                                            
                           FOR THE YEAR ENDED DECEMBER 31, 1996                                                     

    Column A        Column B        Column C            Column D                   Column E               Column F  
                                                    Cost capitalized            Gross amount                        
                                 Initial Cost         subsequent to           at which carried                      
                                 to Company            acquisition           at close of period          Accumulated
                    Encum-             Building &    Improve-    Carrying        Buildings &                Depre-  
Description         brances    Land   Improvements    ments        Costs   Land  Improvements  Total        ciation 
------------        -------    ----   ------------   --------    --------  ----  ------------  -----     -----------
                                  (dollars in thousands)                                                            
                                                                                                                    
Health Care Centers (2)                                                                                             
  Alabama            $   524   $   95  $  1,580      $3,585      $ ---     $   95  $  5,165    $  5,260  $1,047     

Health Care Centers (4)                                                                                             
  Florida             13,753    1,949    17,406      10,895        ---      1,949    28,301      30,250   4,372     

Health Care Centers (1)                                                                                             
  Georgia                168       52       865         ---        ---         52       865         917     345     

Health Care Centers (3)                                                                                             
  Kentucky               ---      201     2,591         ---        ---        201     2,591       2,792     850     

Health Care Centers (5)                                                                                             
  Missouri            16,962    1,070    21,860         ---        ---      1,070    21,860      22,930   4,421     

Health Care Centers (3)                                                                                             
  South Carolina       7,483      572     9,953         ---        ---        572     9,953      10,525   2,781     

Health Care Centers (21)                                                                                            
  Tennessee           12,851    2,118    31,037         ---        ---      2,118    31,037      33,155   9,101     

Health Care Centers (1)                                                                                             
  Virginia             3,835      176     2,511         ---        ---        176     2,511       2,687     549     

Health Care Centers (1)                                                                                             
  Arizona              3,136      453     4,558         ---        ---        453     4,558       5,011      47     

Health Care Centers (2)                                                                                             
  Idaho                  ---      365     6,824         ---        ---        365     6,824       7,189      71     

Retirement Center (1)                                                                                               
  Missouri               ---      354     3,181         ---        ---        354     3,181       3,535     619     

Retirement Centers (2)                                                                                              
  Tennessee            1,296       64     3,071         ---        ---         64     3,071       3,135     641     

Acute Care Hospital (1)                                                                                             
  Kentucky               ---      540     6,961         ---        ---        540     6,961       7,501     899     

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                             NATIONAL HEALTH INVESTORS, INC.            
                 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                           FOR THE YEAR ENDED DECEMBER 31, 1996         
                                       (Continued)                      


                                Column G      Column H                  

                                Date of    Date                         
Description                   Construction    Acquired                  
                                                                        
Health Care Centers (2)                                                 
  Alabama                         N/A        10/17/91                   

Health Care Centers (4)                                                 
  Florida                         N/A        10/17/91                   

Health Care Centers (1)                                                 
  Georgia                         N/A        10/17/91                   

Health Care Centers (3)                                                 
  Kentucky                        N/A        10/17/91                   

Health Care Centers (5)                                                 
  Missouri                        N/A        10/17/91                   

Health Care Centers (3)                                                 
  South Carolina                  N/A        10/17/91                   

Health Care Centers (21)                                                
  Tennessee                       N/A        10/17/91                   

Health Care Centers (1)                                                 
  Virginia                        N/A        10/17/91                   

Health Care Centers (1)                                                 
  Arizona                         --         8/13/96                    

Health Care Centers (2)                                                 
  Idaho                           --         8/13/96                    

Retirement Center (1)                                                   
  Missouri                        N/A        10/17/91                   

Retirement Centers (2)                                                  
  Tennessee                       N/A        10/17/91                   

Acute Care Hospital (1)                                                 
  Kentucky                        N/A        6/12/92                    


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                             NATIONAL HEALTH INVESTORS, INC.                                                       
                 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION                                           
                           FOR THE YEAR ENDED DECEMBER 31, 1996                                                    


   Column A         Column B        Column C            Column D                   Column E            Column F    

-----------------   --------   --------------------  -------------------  -------------------------  ------------  
                                                    Cost capitalized            Gross amount                       
                               Initial Cost            subsequent to         at which carried                      
                                 to Company             acquisition          at close of period                    
                               -------------------  --------------------  -------------------------                
                                                                                                        Accumulated
                    Encum-            Building &    Improve-    Carrying        Buildings &                Depre-  
Description         brances    Land   Improvements    ments       Costs   Land  Improvements  Total        ciation 
-----------         -------  -------  ------------  --------    --------  ----  ------------  -----     -----------
                                  (dollars in thousands)                                                           
                                                                                                                   
Medical Office Building (1)                                                                                        
  Texas                  ---     631       5,263         985       ---        631    6,248       6,879       539   

Medical Office Building (1)                                                                                        
  Florida                ---     170       3,349         ---       ---        170    3,349       3,519       434   

Medical Office Building (1)                                                                                        
  Kentucky               ---      23       3,667         ---       ---         23    3,667       3,690       446   

Medical Office Building (1)                                                                                        
 Louisiana               ---     ---       2,989         164       ---        ---    3,153       3,153       384   

Medical Office Building (1)                                                                                        
  Utah                   ---     223       6,541         ---       ---        223    6,541       6,764       789   

Assisted Living Centers (2)                                                                                        
  Florida                ---   5,089      20,725         ---       ---      5,089   20,725      25,814       269   

Assisted Living Centers (1)                                                                                        
  New Jersey             ---   4,229      13,030         ---       ---      4,229   13,030      17,259       176   

Assisted Living Centers (1)                                                                                        
  Texas                  ---   2,094       9,091         ---       ---      2,094    9,091      11,185       115   
                      ------  ------     -------      ------     ------    ------  -------     -------    ------   
                     $60,008 $20,468    $177,053     $15,629    $  ---    $20,468 $192,682    $213,150   $28,895   
                      ======  ======     =======      ======     ======    ======  =======     =======    ======   

<F1>(A)    See Notes 3 and 17 of Notes to Consolidated Financial Statements.    

<F2>(B)    The aggregate cost for federal income tax purposes is                
approximately $257,448,833.58.                            

<F3>(C)    Depreciation is calculated using depreciation lives up to 40         
years for all completed facilities.                       

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                             NATIONAL HEALTH INVESTORS, INC.            
                 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                           FOR THE YEAR ENDED DECEMBER 31, 1996         
                                       (Continued)                      


  Column G      Column H                                                

  Date of         Date                                                  
Construction    Acquired                                                

                                                                        
   1-1-95        N/A                                                    

   N/A           6/30/93                                                

   N/A           7/27/93                                                

   1-1-95        N/A                                                    

   1-1-95        N/A                                                    

    ---          8/6/96                                                 

    ---          8/6/96                                                 

    ---          8/6/96                                                 


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                             NATIONAL HEALTH INVESTORS, INC.            
                 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                           FOR THE YEAR ENDED DECEMBER 31, 1996         



                                                   December 31          
                                             1996       1995      1994  
                                                  (in thousands)        
                                                                        
Investment in Real Estate:                                              
  Balance at beginning of period           $145,258   $134,195  $124,142
  Additions through cash expenditures        67,892     11,063    10,053
  Improvements                                  ---        ---       ---
  Balance at end of year                   $213,150   $145,258  $134,195

Accumulated Depreciation:                                               
  Balance at beginning of period           $ 22,063   $ 16,043  $ 10,766
  Addition charged to costs and expenses      6,832      6,020     5,277
  Balance at end of year                   $ 28,895   $ 22,063  $ 16,043


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                             NATIONAL HEALTH INVESTORS, INC.                                                  
                       SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE                                            
                           FOR THE YEAR ENDED DECEMBER 31, 1996                                               

       Column A                   Column B             Column C          Column D      Column E  Column F     
--------------------------        --------             --------          --------      --------  --------     

                                                         Final            Monthly                 Original    
                                  Interest              Maturity          Payment      Prior     Face Amount  
Description                         Rate                  Date             Terms       Liens     Of Mortgages 
-----------                       --------              --------          -------      -----     ------------ 
                                  (dollars in thousands)                                                      
                                                                                                              
LONG-TERM CARE FACILITIES:                                                                                    

First Mortgage Loans:                                                                                         

SouthTrust Bank of                 8.74% &                                                                    
     Alabama (A)                   Variable            September, 2000     $  166,000   None      $ 19,683,000
New Milford, Connecticut (B)(M)    10.75% & 11.93%     September, 2000      1,384,000   None       141,638,000
Augusta and Pooler (C)(M)                                                                                     
     Georgia                       10.5%               December, 2002         132,000   None        13,300,000
Bedford and Nashua,                                                                                           
     New Hampshire (D)(M)          10.75%              October, 2003          103,000   None        12,200,000
Manchester and Epsom,                                                                                         
     New Hampshire (M)(N)          10.50%              June, 2011             229,000   None        25,805,000
Pittsfield Massachusetts (E)(M)    10.00%              December, 2003         240,000   None        29,500,000
Seattle, Tacoma, and Billington,                                                                              
     Washington (F)(M)             11.0%               October, 2004          149,000   None        15,000,000
Greeley, Colorado (G)(M)           10.5%               March, 2004            180,000   None        19,100,000
Dallas Texas (I)(M)                11.35%              June, 2010             182,000   None        18,000,000
Fincastle, Hot Springs, Lebanon,                                                                              
  Bastian, Low Moor, Bristol,                                                                                 
  Midlothian, Virginia (K)(M)      10.25%              February, 2006         222,000   None        25,000,000
Williston and Gainesville,                                                                                    
     Florida (H)(M)                11.35%              December, 2005          98,000   None         9,620,000
Florissant, Joplin, Sikeston                                                                                  
     Missouri (O)(M)               11.00%              September, 2003         98,000   None        10,000,000
Missouri and Kansas (M)(P)         11.0%               August, 1999           258,000   None        26,000,000
New Milford, Connecticut(M)(Q)     10.75%              September, 2000        116,000   None        12,062,000

Construction Loans:                                                                                           
Ocoee, Florida (L)(M)              11.25% &                                                                   
                                   Variable            February, 2006             ---   None         5,900,000
Castle Rock, Colorado (L)(M)       10.50%              October, 2006              ---   None         5,200,000
Tallahassee, Florida (L)(M)        10.50%              September, 2006            ---   None         5,400,000

Seven Mortgages(M)                 7.75%-15.0%         February, 1997             N/A   None         N/A      
                                                       December, 2011                                         
Thirteen Mortgages(M)              10.02%-15.0%        December, 1997-            N/A   None         N/A      
                                                       June, 2006                                             
Eight Mortgages(M)                 9.875%-11.0%        September, 1997-           N/A   None         N/A      
                                                       April, 2005                                            

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                             NATIONAL HEALTH INVESTORS, INC.      
                       SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
                           FOR THE YEAR ENDED DECEMBER 31, 1996   


  Column G              Column H                                  
                    Principal Amount                              
                    of Loans Subject                              
                     to Delinquent                                
Carrying Amount      Principal or                                 
  of Mortgages          Interest                                  
---------------     ----------------                              
                                                                  
$ 19,666,000             None                                     
 138,704,000             None                                     

  13,252,000             None                                     

  12,035,000             None                                     

  25,805,000             None                                     
  28,834,000             None                                     

  14,727,000             None                                     
  18,640,000             None                                     
  17,837,000             None                                     

  22,896,000             None                                     

   9,545,000             None                                     

   9,722,000             None                                     
  26,000,000             None                                     
  12,062,000             None                                     

   4,828,000             None                                     
   1,009,000             None                                     
   1,820,000             None                                     

  10,402,000             None                                     

  56,414,000             None                                     

  55,027,000             None                                     

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                             NATIONAL HEALTH INVESTORS, INC.                                     
                       SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE                               
                           FOR THE YEAR ENDED DECEMBER 31, 1996                                  

       Column A               Column B  Column C  Column D  Column E  Column F                   

                                              Final            Monthly               Original    
                           Interest          Maturity          Payment       Prior   Face Amount 
Description                   Rate             Date            Terms         Liens   Of Mortgages
-----------------------    --------          --------------    -------       -----   ------------
                                  (dollars in thousands)                                         
                                                                                                 
Term Notes:                                                                                      
     Johnson City, Tennessee       7.5%      June, 2019         15,000       None    2,062,000   
     Lewisburg, Tennessee          7.5%      December, 2018      7,000       None      968,000   
     Smithville, Tennessee         7.5%      December, 2017      7,000       None    1,016,000   

HOSPITALS:                                                                                       

First Mortgage Notes:                                                                            
   Metaire, Louisiana (J)(M)      12.0%      April, 2002       408,000       None   25,700,000   

ASSISTED LIVING CENTERS:                                                                         

Construction Loans:                                                                              
   Tavares, Florida (L)(M)        10.75%     August, 2006          ---       None      869,000   

RETIREMENT CENTERS:                                                                              

Construction Loans:                                                                              
   Corpus Christi, Texas (L)(M)   11.25%     April, 2006           ---       None       4,700,000

<F1>(A)   Mortgage loan participation agreement, of which the Company has                        
          43.9% participation.                                                                   
          Balloon payment of $18,473,000 due at mataurity.                                       
<F2>(B)   Balloon payment of $132,663,000 due at maturity.                                       
<F3>(C)   Balloon payment of $11,854,000 due at maturity.                                        
<F4>(D)   Effective October, 1998 payment will be adjusted to include                            
          interest at the greater of 10.75% or the rate that ten-year                            
          United States securities yield plus 4.5%.                                              
          Balloon payment of $9,723,000 due at maturity.                                         
<F5>(E)   Effective May, 1998, the monthly payment will be adjusted to include                   
          principal and interest payments of $294,000 at 11%.  Balloon payment                   
          of $27,346,000 due at maturity.                                                        
<F6>(F)   Effective October, 2000, payment will be adjusted to include interest                  
          at the greater of 11.0% or the rate that ten-year United States                        
          securities yield plus 5%.                                                              
          Balloon payment of $12,979,000 due at maturity.                                        
<F7>(G)   Effective April, 1999, monthly payment will be adjusted to include                     
          interest at the greater of 10.5% or the rate that ten-year United                      
          States securities yield plus 5%. Balloon payment of $16,332,000                        
          due at maturity.                                                                       
<F8>(H)   Interest escalates .001% per year. Balloon payment of $8,420,000                       
          due at maturity.                                                                       
<F9>(I)   Interest escalates 0.1% per year through September 1, 2005.                            
          Thereafter the payment will be adjusted to include interest                            
          at the greater of 12.25% or the rate that five-year United States                      
          securities yield plus 4.5%.  Balloon payment of $15,806,000                            
          due at maturity.                                                                       
<F10>(J)  Constant monthly payments of $214,000, plus interest.                                  
<F11>(K)  Monthly interest only payments through December 1998.                                  
          Effective January, 1997 and 1998, the interest rate will be                            
          adjusted to 10.75% and 10.50% respectively.  Effective January, 1999,                  
          the interest escalates .15% per year through maturity.                                 
          Balloon payment of $23,336,000 due at maturity.                                        
<F12>(L)  Monthly payments of interest only during construction.  The Company                    
          committed to provide permanent financing when construction is                          
          completed.                                                                             
<F13>(M)  Mortgages provide for prepayment penalties.                                            
<F14>(N)  Effective August, 1997, and annually thereafter, the interest rate                     
          will be increased by .15%.  Principal of $25,805,000 due at maturity.                  
<F15>(O)  Balloon payment of $8,667,000 due at maturity.                                         
<F16>(P)  Balloon payment of $25,414,000 due at maturity.                                        
<F17>(Q)  Balloon payment of $11,274,000 due at maturity.                                        

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                             NATIONAL HEALTH INVESTORS, INC.      
                       SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
                           FOR THE YEAR ENDED DECEMBER 31, 1996   


  Column G              Column H                                  
---------------     ----------------                              
                    Principal Amount                              
                    of Loans Subject                              
                     to Delinquent                                
Carrying Amount       Principal or                                
  of Mortgages         Interest                                   

                                                                  
   1,923,000             None                                     
     901,000             None                                     
     939,000             None                                     

  13,707,000             None                                     

      76,000             None                                     

    2,458,000            None                                     
 $519,229,000                                                     


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                             NATIONAL HEALTH INVESTORS, INC.               
                 SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE (Continued)   
                           FOR THE YEAR ENDED DECEMBER 31, 1996            

<F1>(1)   See Note 4 of Notes to Consolidated Financial Statements.        
<F2>(2)   For tax purposes, the cost of investments is the carrying amount,
          as disclosed in the schedule.                                    

                                                     December 31           
                                               1996      1995     1994     
                                                    (in thousands)         
                                                                           
Reconciliation of mortgage loans:                                          
  Balance at beginning of period             $469,628  $475,253  $269,817  
  Additions:                                                               
     New mortgage loans                       153,084    85,145   251,495  

  Deductions during period:                                                
     Collection of principal                  103,483    90,770    46,059  

  Balance at end of period                   $519,229  $469,628  $475,253  


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EXHIBIT 24                

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS               

As independent public accountants, we hereby consent to the                     
incorporation by reference of our reports on National Health                    
Investors, Inc. dated January 11, 1997, included in this Form 10-               
K for the year ended December 31, 1996, into the Company's                      
previously filed Registration Statements No. 33-72370 and No. 33-               
85398.                                                                          

ARTHUR ANDERSEN LLP                                                             

Nashville, Tennessee                                                            
March 5, 1997                                                                   

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10-K405 Filing		Date		First		Last			Other Filings
		3/4/93		4
		3/25/93		13
		11/9/93		2		13
		12/31/93		13
		8/31/94		2
		11/1/94		4
		12/31/94		4		13
		4/28/95		13
		5/23/95		13
		7/26/95		13
		10/11/95		13
		10/17/95		2
		12/12/95		13
		12/15/95		6
		12/28/95		2
		12/29/95		13
		12/31/95		2		13
		1/1/96		13
		1/15/96		13
		2/9/96		13					SC 13G/A
		2/26/96		6
		3/21/96		2
		5/10/96		13
		8/9/96		13
		8/31/96		2
		9/1/96		2
		10/16/96		2		13
		11/11/96		13
For The Period Ended		12/31/96		1		25			DEF 14A
		1/11/97		8		25
		1/27/97		1
		1/29/97		13
		2/21/97		2
		3/5/97		5		25
Filed On / Filed As Of		3/6/97
		4/1/98		13
		8/15/98		13
		2/15/99		13
		10/17/99		13
		1/1/1		13
		8/15/1		13
		12/31/1		2		13			DEF 14A, 10-K405
		2/8/2		13
		2/1/4		13
		9/1/5		13		22
		1/1/6		13
		10/17/6		13
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