"Hospital Land" is the nickname Jonathan and Grace give to the area of town where all the hospitals are—a little on the nose, but it makes sense. Not only do these few blocks encompass all the major hospitals in the city, but many doctors and hospital staffers live there, and the shops all cater to their needs. Grace thinks of the hospitals as their own worlds: "They were dramatic stages on which an incalculable number of great stories (mostly tragic) were playing on a perpetual loop: scenes of recognition and reversal, religious fervor, redemption and reconciliation, cataclysmic loss." (10.178).
Unsurprisingly, Grace considers Jonathan the white knight of Hospital Land:
He had the exact same kind of intensity with absolutely everyone, king or commoner in the land, an avid interest and a need for connection…[He] was so respectful not just of your child, but of you, [and he] thought deeply about the human experience your child's illness had created, even as he labored to relieve suffering (10.178-79).
Yeah, he's a real prince.
Since Grace is so caught up in the idea of Hospital Land, the actual humans who live and work there are reduced to one-dimensional characters: Jonathan's supervisor, Ross Waycaster, is so blunt that heroic, compassionate Jonathan has consoled Waycaster's patients weeping in the hallways. Fellow resident Rena Chang believes in parallel healing strategies, so she's cast as a flighty hippie. Dr. Robertson Sharp III becomes Robertson Sharp-the-Turd, playing the role of the out-of-touch, by-the-book administrator.
Of course, as Grace has advised her own patients, the problem with inventing fictional stories about the people in your life is that those stories are usually not true. In reality, Dr. Waycaster was the only person brave enough to call Jonathan out for his affair with Malaga, Dr. Rena Chang was Jonathan's mistress, Dr. Robertson Sharp III saw right through Jonathan's superficial charm all along, and Jonathan himself is nobody's hero.
Grace's description of Hospital Land is another example of her willingness to ignore her better judgment. We can absolutely guarantee that Therapist Grace would raise her judgmental eyebrows at any patient who came into her office spinning such tales of heroism and tragedy, never considering that there might be more than one side to the fairy tale.