The Japanese used Hospital ships as troop transports in some cases. Near the end of the war, a hospital ship was stopped and boarded by 2 USN DDs. They found ammunition, guns, and troops aboard. She was taken as a prize (later used for repatriation).
Sometimes they were not properly marked (unlit), the POW ships early on were not marked at all in many (Most? All?) cases.
Hitting them can be made not worth your while... a negative renown value. We'll ask Luke and Ducimus what they want for that for their respective mods
The point of having such schemes is to make it interesting. You get a radar contact, hunt it down, it comes into view... and it's a hospital ship.
Looking at the TROMs, some were escorted, as well.