Hospital

It's common. It's not the end of the world.

A lot of settings come up again and again in horror (as do other elements). It doesn’t mean that using them is a waste of time – reinventing old ideas is a part of the genre. A setting like you describe leaves a lot of space for a rich background on why the place is haunted and by what, it has potential and you shouldn’t be intimidated away from a story you wish to write just because the setting has been used before.

This said I’m not actually sure how often horror fiction uses a hospital setting. I’ve run into a fair few short stories and some (but not many) novels – I think it’s predominantly used in film, TV and video games.

Good luck with your story.

Cold, sterile halls
Bad lighting
Possibility for misdiagnosis
Closed off wings
Rumors of a particularly violent/insane patient
Needles
Tempermental night nurses

What's not to like? Of course it's been done before...but not by you. Setting is backdrop, it breathes life into a story by making it happen somewhere. Why not a hospital, part of the work has (kind of) been done for you, since you don't have to worry about the careers of the supporting characters? Go for it, and here's hoping you have fun with it. :)

Hrm... my art professors would challenge you to think a little deeper and see if there IS any other setting that you could make scary and do the same things that you want it to do. Personally, I think that 'overused' things are that way because they are good. So, after thinking deeper, if you decide that this is still the setting for you, go for it.

Would this be a hospital with actual personnel, patients and other people around, or is it an abandoned hospital ward?

With all due respect to quotemaster's art professor, I'd like to disagree with (him or her?). Not all stories can take place in just any old setting. In fact, the best tales are that because they pretty much couldn't happen anywhere else. Granted, a lot of Stephen King's stories could take place in "any small town" but you couldn't put them in say, the big city because it's the quirks of small town life that add to the depth of the tale. In fact, he placed them in Maine, because there are traits that he knows about Maine which add a depth to the tales which wouldn't work in say, California ("The Shining" anyone? Wouldn't be the same story without all that snow eh?).

The point is, if the story takes place in a mental hospital, use the terrors (and mundanity) that can't be found anywhere else but this location otherwise it's just a "haunted house story that takes place in a hospital" and that's where things can seem like the same ol' cliche'd story.

One of my favorite creepy elements of hospitals is the potential for people with genuinely good intentions to do horrifying things. That's not just horror stories; look at the treatment of mentally ill individuals through history. I'm sure some of the people carrying out those treatments were sadists, but I imagine most of them were good people.

Of course, this occurs all over the social spectrum, but the people with good intentions have a lot of power in hospitals, especially when we're talking about civil commitment.

(disclaimer: I realize that the treatment of mentally ill individuals is much better today; I don't mean at all to disparage mental health professionals)

I been hitting problems like this since I've started writing. i have a slight tendancy to...how shall we put it....over-cliche my stories. While I have yet to find a total cure for this calamity, I've found that adding a new and semi- fresh character into the setting helps. If your story is a ghost story, why not take a few cues from Libba Bray and write in a blind young girl who, along with your protagonist, can hear the ghosts but no one else can. A new character can do wonders for a plot. Good luck with your novel!