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If you create a new page for your site that looks and feels just like the rest of the site, and if it is a useful page for users, then it's ok. If on the otherhand, you create a page that is basically just a spam page that only exist to impress the SE's then they will be about as impressed as the end user is!
If you sell 2 types of widget, then put together a page for each one and ensure it is useful to the user. Then optimise each page and Bob's your uncle!
This is one of those things that's kind of like the difference between "shock and awe" and "terror". One is when you do it, the other is when your competition does it.
It is definitely a no-no to have pages which consist of nothing but keywords, pages which link to your site but are not linked to (so that the flow is one way, i.e. users of the rest of your site can't find the page but searchers can), and pages which have the exact same content except that one word or phrase has been substituted for another.
One of my competitors uses doorway pages, and believe me, they're quite obvious. His titles read like "98.93% relevancy, blue widgets, blue widgets, and more blue widgets" and his copy is like "if you are interested in blue widgets, you might also like red doodads, blue thigmagiggies, orange watchamacallits, and more blue widgets." and there are no blue widgets to be found anywhere on his site, and he has a link that says "click here for blue widgets" which leads to his homepage, which has nothing to do with blue widgets. This sort of thing is bad. Other than that, I think you're OK.
Write a short article about city1. Then, say that you offer service in city1, and provide link to appropriate page. Repeat for other cities. This is more work, but it also provides useful information. If they are looking for service in city1, they might want general information about city1 as well. This is what I do. I'm not sure how well it works yet, check back with me in a few months, but I have pages offering service in each city, and each page is unique because it contains unique info about the city, so I don't think I could draw a penalty for it.
Or, alternately, what other services are available in city1? Can you offer those as well? Maybe do a mini-guide to city1, offering service1, service2 etc along with info about city1? Again, lots of work but it will probably pay off. I'm planning to do this when I get time.
If the page looks like it's intended for SE's I'd think twice. They can be intended and still useful.
>>Cannot be done. I'm an ambulance chaser!
It's not easy to find a good ambulance chaser when you need one. How about a page for each city with traveling and/or driving instructions and maybe a map so they'll know how to get to your office.
Plus, if you're nice enough to go see people at the hospital to talk to them when they need your help, you could list the hospital(s) for each city with a link to them and let the people know you offer that convenience to them in their time of need.