What is wrong with that???
In a very similar story, I lived in Shelbyville, Tennessee, when a local entrepreneur built a gym, "The Training Barn," at significant personal expense and hoped to recoup his investment by selling memberships. He did well for a time, with a clean well-managed facility equipped with good machines, free weights, and a large area for aerobics and such fitness classes taught by locally-hired people.
Then the city decided to put in a gym at the Civic Center, and asked about half as much for a membership - which they could do because they had no need to show a return on an investment.
All I could guess is that The Training Barn's owner must have refused to give a free membership to the mayor and city council...
The Training Barn was soon gone.
Whats wrong is it is subjective as to how much income is lost. It opens the government to looting by government employees. Just pass a bill that builds some thing near a failing business and you could make a ton of money on the backs of the tax payer.
Better policy would be to get the government out of businesses that compete with private companies.
If there is not hospital then maybe offer a incentive to build one. Make the incentive open to everyone so that there is no one person that can use the government to get free money.