Hospital room: treat poorly ambassador inside (7)
I believe the answer is:
Here is my best explanation:
'hospital room' is the definition.
(I've seen this before)
'treat poorly ambassador inside' is the subsidiary indication.
'poorly' indicates anagramming the letters.
'ambassador' becomes 'he'.
'inside' means one lot of letters goes inside another.
'treat' with letters rearranged gives 'tatre'.
'tatre' placed around 'he' is 'theatre'.
(Other definitions for theatre that I've seen before include "Scene of operations or dramatic performances", "Area of operations", "(Military) field of action", "Building for dramatic art", "Scene of action", "Operating area", "Play scene", "Venue for plays, films and surgery", "Scene of plays" and "Auditorium".)