So sorry that happened to you. As you have discovered, Airbnb imposes big penalties on hosts for cancelling a reservation. The guest asked you to cancel instead of cancelling themselves because they didn't want to lose fees to airbnb or have to prove they had an extenuating circumstance.
Hopefully, the guest told you about their hospice situation on airbnb's message system. If so, you should contact Airbnb and tell them
1- you're new
2- guest requested cancellation
3-you have proof of #2
Based on this, the customer service rep should be able to unblock your dates. If they don't, ask for manager review.
You can contact airbnb at the phone number shown on the print out of the reservation.
Good luck.