Fighter of old in hospital housing ethnic group (7)
I believe the answer is:
saracen
'fighter of old' is the definition.
(medieval term for a Muslim fighter in the Crusades)
'hospital housing ethnic group' is the wordplay.
'hospital' becomes 'san' (short for sanatorium).
'housing' is an insertion indicator.
'ethnic group' becomes 'race' (a racial group).
'san' placed around 'race' is 'SARACEN'.
'in' is the link.
(Other definitions for saracen that I've seen before include "Old Arab" , "Arab fighting the Crusades" , "British Army armoured people carrier" , "Crusader's foe" , "Muslim defender in Crusades" .)