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The benefit lies in being able to retrieve data by hospital/doctor when doing data entry (you don't have to input all the details every time) and for subsequent reporting. If you know they're in the data in a consistent format, that makes retrieval much simpler.
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Details of what? I apologize - I don't mean to be obtuse. We would store no data except for their name on the hospitals and doctors in this database. So we wouldn't, for example, store the doctor's address or the hospital's phone number. I'd plan on creating a lookup with fixed values (drop-down box) to ensure consistency. If I were to create new tables for hospitals and doctors, why would I not create tables for every other column which has a pre-set number of options (such as the wounds or infections columns)?
If I understand Access' reporting capabilities (and I may not!), I don't think I'll have to do mail merges right now. Our health care-specific accounting package has all of the information needed for mailings, and since mass mailings come out of the business office, they'd continue using that program. This project is not meant to replace that program but rather store data and create reports otherwise unavailable to us.
What I was planning on doing, for now, was just running with the Excel workbooks and then importing them to Access when I had the forms ready. (I'm comfortable that the data entry folks can use the bulky spreadsheet I created!). In fact, our hospice has already started using the workbook I created for them. In giving it more thought, I can see why it's necessary to interface with both programs. Our hospice workbook automatically calculates the next assessment period, which is vital for hospice operations, and I doubt there's a way to comfortably replicate these calculations in Excel. Maybe a linked workbook is the answer, I don't know. I have a lot of researching to do!
Also, there are some sample reports hidden in the Excel workbook I uploaded. While the links are broken (the reports were designed early in the process), you can see what I was trying to do.