People will debate this point (and both sides seem to have valid points), but personally I consider a quarantine tank and a hospital tank two separate entities, and run them differently.
My quarantine tank is always "running". It's fully cycled, and has a few fish in it to keep a source of ammonia present. Most of these fish usually get moved before new fish are put into quarantine. So, in essence, it's a full-blown small tank (and plant nursery).
My hospital tank is just a tank, HOB filter, and heater. I do not cycle it, although when in use, I'll usually take some filter floss from an established tank and place it in the hospital tank's filter. Daily (or almost daily) water changes seem to be recommended with all the medicines I use, so having a cycled tank doesn't seem to really be necessary.
Some people will advise running a quarantine tank the same way as I do my hospital tank. That will probably work fine, with very frequent water changes.
edit: oh, and your guess is correct, Lynn, pretty much everyone will advise against putting substrate in a hospital tank, since you don't want to clean it afterwards. On occasion, I've used a few plastic plants to provide a little 'cover', and then give them a quick diluted bleach dip (and thorough rinse!) after the tank is torn down.
