Rainy Night: The scene opens in an asylum. We see a man walking up to a door and peering in. We can't tell who it is. A patient, Janice, inside is sitting on her bed, terrified by who she sees outside the door. Door opens and young boy walks in asking her to come play with him. She's terrified and the child begins to choke her. Her roommate, Laura awakes to see Janice choking (but alone) on her bed. Laura gets to her and holds her as she says, "He came to me" and dies.
Sunny Day: Rachel meets her friend Emily (the administrator West View Sanitarium) in a park. Emily tells Rachel about Janice's death, apparently from congestive heart failure. This isn't the first death and Emily doesn't think they're the accidents and suicides they've been ruled.
Conference room: Rachel explains the situation and tells the team that she's going to fake a breakdown and see what she can find out as a patient. Many of the doctors are resistant to Emily's changes in the sanitarium's procedures.
Rainy Night; Asylum: Rachel is admitted with Emily listed as her doctor. She's taken to the same room Janice was in. Rachel asks Laura about Janice but Laura becomes frightened and retreats into her her private world.
Day; Dr. Peyton's Office: Rachel has a session with Dr. Peyton. During the session Rachel hallucinates and sees rather large bugs crawling on Peyton's desk and on his body. She becomes terrified. During the rest of the session Rachel becomes increasingly irrational and upset and at one point angrily accuses Peyton of patronizing her.
Rec Room: Rachel is taken into a public or rec room where she meets Suzy. Suzy tells her that Janice was killed by 'The Voices'. "You gotta be very careful when you hear the voices. Ya gotta play it smart." She tells Rachel that Janice listened to the voices too long and that's when her long dead brother came to her and killed her. Suzy shows Rachel how she's managed to avoid hearing the voices... she's safety pinned her ears closed.
Outside: Walking with Emily, Rachel says "I hate bugs". They speculate about her hallucination. Emily thinks Petyon is behind it and that he's trying to discredit Emily and her reforms. Emily reminds Rachel that neither Janice nor Suzy had a history of hallucinations before being patients here. Rachel suggests Peyton might be experimenting on the patients with hallucinogenic drugs, but they come to no conclusion. Rachel's beginning to deteriorate a bit. Emily reminds Rachel that it's time for visiting hours and that she has one waiting.
Rec Room: Derek and Rachel sit together. Other patients wander around in the room. Derek is somewhat uncomfortable there, "My God. This place is depressing." Rachel suspect a supernatural component to the hallucinations. She tells Derek that Janice's biggest fear was of wasting away and that her little brother died of leukemia as a child. Derek wonders if someone knew of that fear and used it purposely against Janice. Derek tells her that he will look into the supernatural aspect for her. She becomes upset and accuses him of patronizing her. She's losing it more and more.
Night: The same unknown figure from before shows up outside Suzy's door. She wakes and sees her dead husband. His shirt is bloody from the obviously fatal slit in his throat. He attacks her with the scissors she killed him with. Suddenly we see Emily slapping Suzy to wake her up and find that Suzy has trying to rip her own throat out.
House: Alex discovered that only one other thing had been built on the site of the sanitarium back in the 1840s but it closed down due to a high incidence of industrial accidents. The road leading up to the place is called "Hobbes Road" (Hobbes is an old term for the devil) and the old Spanish name the area was "Devil s Point". A map of the area shows two horns of land jutting out into the ocean.
Peyton's Office: Rachel is on the couch and he asks her what she's most afraid of. Her response is "backsliding". During the course of the session it is suggested that she may have been abused by her father. She hallucinates seeing Peyton reaching out for her. "Keep your filthy hands off of me." Rachel looses it completely. The session ends.
Sanitarium Corridors: Emily and Peyton are walking together. He thinks Rachel is faking. Emily just stops short of accusing Peyton. He warns her in a genial way, of course, that people who play with matches do get burned. Emily's response is a bit stronger than it probably should be to that comment.
Rec Room: Rachel seems to be alone. She's gone now. Looks like she's gone completely around the bend. She's sitting, playing with a slinky. A checker board is in front of her with the checkers laid out in a precise pattern. There are also cards laid out along with other games. Peyton comes in and brings Kat with him. Kat won't approach Rachel since Peyton told her she could start to unravel. Kat is not terribly concerned with her mother's condition. She tells Rachel she's going to go live with Peyton until Rachel gets better. "If you ever get better." Peyton walks out with Kat while Rachel screams "You leave her alone!" over and over while she struggles unsuccessfully to get out of her chair. She seems to be trapped in it. Suddenly, Peyton is there at her side and there are other patients in the room. He asks Rachel if she's all right and she stands and says she is. He leaves.
Outside: Walking with Emily, Rachel is freaking out. Emily is concerned with how disturbed Rachel is becoming. Rachel argues that she's ok and she just wants to try for another couple of days to see what she can find out. Emily reluctantly agrees but forbids any further sessions with Peyton.
Night; Emily's Office: She comes in and locks the door behind her. While she's digging in her files we see a mist flowing in under the door. Suddenly, Peyton is standing in her office. Emily: What are you doing here so late? Peyton: I've always been here... in one form or another. Tell me, do you like this shape? I find it appropriate to the age.
They talk, he maintains the same genial manner he always has, while Emily is obviously afraid of him. He tells her she's not the first to try and stop him from feeding on human frailty and fear. We see terrible burn scars on Emily's arm. She's shocked when he knows that they're from a house fire she started when she played with matches once as a child. He lights a match and throws it onto her desk. The entire office goes up in flame. Emily screams and falls to the floor while he stands there watching with his normal pleasant expression. Then the flames are gone and the office is untouched. Emily lies dead on the floor.
House: Derek informs Alex and Nick of Emily's death. Derek is going to get Rachel but refuses Nick's offer of help. Alex tells him that the historical society in the town near the sanitarium is sending over the diary of the local minister from the 1840s which could offer some answers.
Rachel's Room: Rachel bangs on her door screaming for someone to come. Laura lies resigned and frightened on her bed. They've apparently been forgotten.
Peyton's Office: Derek demands to take Rachel away but Peyton refuses, saying that Rachel seems to be suffering from paranoid schizophrenia and that the law lets him hold her for observation for 72 hours. 'Something' passes between the two of them. We wonder if, perhaps, Derek's worst fear is being powerless when someone he cares about is in danger and that the demon tapped into that a little. Derek leaves.
Rachel's Room: An orderly comes to take Rachel to a padded cell. Laura fears that "It's coming to get her." Rachel screams that she'll come back for Laura. As soon as Laura's alone she starts hearing voices calling her name and the door slowly opens on its own.
Padded Cell: Rachel hears Kat's voice. She tries to ignore it and convince herself it's not real but can't resist the image of Kat who asks "What will I do if you don't come home? What will I do if you die?" Rachel holds her but Kat vanishes and Rachel loses it yet again.
Derek's Car: Derek is talking to Alex and Nick. He tells them to get a writ for Rachel's release from Judge Andrews... but Derek's not going to wait for that. Nick gives him instructions from some building plans he located for how to go through a storm sewer into the basement of the sanitarium. Alex has studied the diary and discovered that there were many mysterious deaths during that period. The minister wrote "To conquer fear you must embrace it."
Rachel's Cell: She's crouched down on the floor and sees a bug like the ones from Peyton's office. Suddenly she's in a nightmare world of strange lights and male voices "I'm coming to get you Rachel." Running down a corridor she runs into a wall where a pair of male arms break through the wall and grab her, pinning her to the wall, holding her intimately. She breaks free and runs screaming down the corridor. She's completely in the grip of the illusion.
Sanitarium Basement: Derek (amazingly dry considering the rainy night and his trip through a sewer) is in the basement and find the stairs up into the hospital. He goes to Rachel's room only to see Laura's body hanging from the ceiling, an apparent suicide. he shows a stunned orderly and demands to know where Rachel is.
Rachel's Nightmare: Rachel's still entrenched in her nightmare. She's running through endless corridors. Finally she runs into Peyton but when she turns to evade him, she runs into Laura, rope burns on her neck. Laura accuses her, "You never came back for me and now I'm dead. Like you soon will be." Suddenly they're out on a balcony in the hospital. "I'm you Rachel. I'm what you're afraid of becoming. Losing your grip. Losing your daughter. Going back to the pills, back to the bottle. Backsliding!" Laura tells Rachel to jump so all the pain will go away. As Rachel starts to lean over the edge, she sees a dim, shadowy, unreal image of Derek on the landing below. He calls her name and she stops. The demon-Laura morphs into an image of Rachel, but still with Laura's rope burn. The two of them vie for Rachel's attention. The demon trying to get Rachel to jump and Derek telling her she must embrace her fear. She takes the demon into her arms which drives it away. As it flees, a disembodied voice warns, "This fight's not over, Rachel. Not by a long shot." Finally the illusion is gone and we see Derek holding Rachel as they both kneel (uncomfortably, or so it seems) on the floor of her padded cell.