Mid Island Bay Hospital is a fictional dilapidated Medical Centre dating back to the 1900s, and the area in which most of the gameplay takes place. It appears to be situated on a fictional island named New Kipling.
Daylight's main character, Sarah Gwynn wakes up in the lobby of Mid Island Bay Hospital, but we don't know a lot about the history of Mid Island. Prior to present day, the last major interaction with Mid Island was nearly 30 years ago. In the early '80s, Mid Island Bay Hospital was a major interest to the G&C Investments Corp, who had designs on renovating the old hospital and turning it into a high-end hospice catering to the wealthy. After spending a lot of money with the officials from the township of New Kipling, which claims Mid Island as its own, G&C was in the final stages of completing its due diligence to take control of the island and its property. They sent a team of contractors and experts to do on-site research, but after a short time G&C abruptly cancels the deal and leaves New Kipling altogether. Curious, the township sends in a team to follow up on G&Cs research, discovering, amongst other things, an abandoned excavation site with 12 grave-sized holes dug in the ground.