Its still used in older examples of distributing audio for hospital radio in the UK.
The main reason that plastic tube distribution was used is that in terms of hygiene, it was pretty easy to keep this system clean. Since modern personal headsets have come along though, and people have their own, it's not the issue that it was. But in that link between the box on the wall (or the local bedside unit) and the listener the tube's pretty reliable - and if it doesn't work it's pretty damn obvious why, and is easy to fix. Unfortunately the same can
not be said for newer electrical headsets.
Having local hospital radio is excellent for recovery rates - people can't wait to get out! Yeah, I know it's a cheap joke, but having listened to a hospital requests show recently, I can't help but think that maybe there's some truth in it...