Hospital room: treat poorly ambassador inside (7)
I believe the answer is:
theatre
'hospital room' is the definition.
(I've seen this before)
'treat poorly ambassador inside' is the wordplay.
'poorly' indicates anagramming the letters.
'ambassador' becomes 'he' (His or Her Excellency).
'inside' means one lot of letters goes inside another.
'treat' anagrammed gives 'tatre'.
'tatre' going around 'he' is 'THEATRE'.
(Other definitions for theatre that I've seen before include "Eg, Oxford's Sheldonian" , "Place of entertainment" , "Drama venue" , "A tether (anag.)" , "Building for dramas" .)