An outspoken woman is placed in the Central State Hospital for examination and evaluation. After a terse interview with Dr. Hayes, she is quickly acquainted with the harsh realities of life in B Ward.
Dr. Hayes realizes he must cultivate more ambitious therapies if he expects to win the fiscal support of a large research group. Long term patient Charlotte grows jealous of the doctor's obvious fascination with the new patient, Karen.
Dr. Hayes conscripts Karen to tape record a message of cooperation and compliance, to be used in future therapies. When Karen attempts to escape, attendant Grath, who is prone to bullying and abuse, volunteers to find her - and succeeds.
Karen spends days confined to a "sleep room." Somerhill encourages Dr. Hayes to become more aggressive in his therapies, just as Verdrey begins to question Hayes's methods. Charlotte is released.
Dr. Hayes subjects Karen to chemical hypnosis and coerces her to reenact the events at the hotel. His unhealthy obsession with her reaches new depths, but his unorthodox role-playing leads to an unexpected breakthrough.
Somerhill receives word of Hayes's revelation from both the proud doctor and a rogue agent, who is furious at having been exposed. Unsatisfied with Hayes's explanation, Verdrey begins to investigate the identity and purpose of the S.I.H.E.
Housebound and suffering from mental collapse, Charlotte receives an encouraging message from an unlikely herald. Dr. Hayes requests Charlotte's special assistance in a personal investigation into the circumstances of Karen's crime.
Following the incident at the Dixie Hotel, Dr. Hayes returns to Central State Hospital just as its orderly operation is interrupted. In defiance of Dr. Hayes, Verdrey attempts to hide Karen where the hospital's darkest secrets are kept.
Somerhill and Dr. Gottfried reveal the hidden workings of the plot in which Karen has been entangled. The abusive Grath finds Karen in the hospital basement, and a bitter grudge is settled.
Somerhill convenes a meeting. Dr. Hayes is challenged to demonstrate the effectiveness of his radical treatments by performing a type of experiment that is forbidden in scientific research.