Frank the guard tells Sister Jude that their newest patient was brought in with no identification. The visit the woman's cell and Jude asks what her name is. When the woman doesn't respond, Jude reminds their patient that she was brought in after attacking a man in a bar for making an anti-Semitic joke. The woman finally says that she broke a bottle and cut the man, and Jude wonders if she lost someone during the war. The patient whistles a tune but doesn't answer and Jude tells Frank that they'll start treatment in the morning.
Arden straps Shelley to a table and prepares to give her an injection. When she asks if it will kill her, Arden tells her that she'll probably live forever.
Kit approaches Grace in the kitchen as they work and asks for a cigarette. She notices his injuries and Kit explains that Arden has been torturing him during his "operations" to find out what happened to the implant chip that was placed in Kit's body. He asks Grace if she believes his story about alien abductors and she says that it doesn't matter. Kit insists that remembering their stories does matter and asks her to tell him hers. Grace explains that her family handyman, Rudy, went berserk and killed her father and stepmother. Her stepsister, Patsy, accused Grace of killing their parents, but Patsy was Rudy's lover and they schemed to get the farm by killing the parents and framing Grace. The police believed Patsy and locked Grace up. Kit tells Grace that he believes her, and she talks about how she missed the horses on the farm most of all because of the freedom they gave her. Kit promises that Grace will be free again.
Thredson visits Lana and tells her that he saw she left during the movie. Lana insists that she was there even after Thredson promises not to tell Jude. He knows that she returned later, just before Jude left the room to look for the patients she claimed were missing. Lana remembers how she, Kit and Grace wondered what the creatures were that they saw in the forest, but realize they can't tell anyone without giving away their failed escape attempt.
Thredson tells Lana that he doesn't believe she belongs in the sanitarium and that she had every right to try an escape. Lana doesn't believe his sincerity and points out that according to all the medical manuals her lesbianism is a sign of insanity. Thredson doesn't believe that she's insane and offers to cure her so that he can get released before he leaves at the end of the week. Lana assures him that she's a lesbian and there is no cure, but Thredson warns her that if she doesn't trust him then it won't end well.
The new patient is in the common room writing a letter to her sister, Kitty, saying that the asylum is like Amsterdam and that the patients are all resigned to death. Lana comes over and warns the newcomer that the orderlies will punish her if they find her with writing materials. She tries to befriend the new patient but the woman refuses her overtures and Lana walks away. Arden comes in to check on the patient and the woman stares at him in shock and recognition. She then goes over to Arden and says that he's a Nazi and that she saw him in Auschwitz. As she grabs him, the orderlies appear her well and she screams that her name is Anne Frank and that she was at Auschwitz and saw Arden there.
Jude interview Anne in her office and demands an explanation. Anne tells her that she hid in the piles of corpses and that the British soldiers eventually found her and nursed her back to health. After the war, she met an American solider, Private William Snow. They married and he brought her back to the states, but he died serving in the Korean War in 1952. Anne chose not to contact her father because he had started a new life with a new family. When her diary was published, Anne realized that reappearing alive would only undo all the good the book had done on exposing the Nazi atrocities. Jude accuses her of indecency but Anne says that Jude is indecent for allowing a Nazi to work at Briarcliff.
Thredson meets with Kit and explains that he doesn't believe that Kit is insane. However, if he gives that diagnosis to the authorities then they'll execute Kit. The psychiatrist suggests that Kit was driven to the murder because of the pressures of society against an interracial marriage, and Kit is creating a fantasy of alien abduction to absolve himself of guilt. Thredson offers to life and spare Kit's life but only if Kit admits to the truth of what he did.
Anne describes how Arden, who was originally Hans Gruper of the S.S., gave the children of Auschwitz candy and offered to save some of them. He flipped a coin to choose which ones and took them away, but when they came back they were... different. Arden had sworn them to secrecy and they never spoke of what he did to them.
Thredson encourages Kit to admit that he felt guilt about marrying Alma, and killed and skinned two other women. According to the police reports, Kit said that Billy and his friends came by the garage just before Alma's murder. Thredson suggests that Kit tried to hide Alma away so that they wouldn't see her. She resisted and Kit killed and skinned her. However, Kit insists that he isn't the killer.
When Jude doubts her story, Anne shows her the concentration camp tattoo on her arm.
In the common room, Lana is collecting her medicine and dreams of being given a reward for her expose on the horrors of Briarcliff. As she takes her pill, she realizes that she has to escape and goes to tell Thredson that she's willing to undergo therapy.
Kit is working in the bakery alone when Grace comes. He tells her about his session with Thredson and wonders if he really is blanking out the fact that he murdered three women. Grace figures that if he's sane enough to have self-doubt then he's sane enough not to be a killer. He grabs her by the throat and asks if she really believes he' a killer. Grace calmly tells him that it doesn't matter because she'll stay by him no matter what. They make love on the table but are interrupted when Frank comes in.
Frank takes Grace and Kit to Jude's office and Mary Eunice picks out a crop from Jude's collection to beat them. Jude says that she's impressed with the younger nun's recent change in personality but tells the couple that they need extreme steps: surgical sterilization. As Kit and Grace object, Frank comes in and tells Jude that two local police detectives have come to Briarcliff to question Arden. Jude tells Mary Eunice to lock up Kit and Grace until the paperwork is done. Frank takes Grace to her cell and Mary Eunice takes out a file from Jude's cabinet and gives it to Kit. She tells him to read it and learn the truth about Grace.
Jude discovers that detectives Byers and Connors are in Arden's office and walks in despite Arden's objections. The detectives explain that a local prostitute accused Arden of roughing her up and finding obscene material and Nazi memorabilia in Arden's bedroom. Jude takes an interest in the Nazi reference while Arden insists that he was at Briarcliff during the time of the alleged incident. The detectives ask Jude if she can confirm Arden's story but Arden storms out without waiting to hear her answer. The nun asks if they're going to arrest Arden on prostitution charges, but they explain that their homicide detectives and ask about Kid, wondering if he has the expertise to skin a woman and remove her head.
Thredson administers aversion therapy to Lana, giving her apmorphine and showing her slides of naked and near-naked women until she throws up. He then shows her a slide of Wendy, naked in bed, and tells Lana that he found it at her house. Lana tells him to give her more apomorphine until she vomits while looking at the photo of Wendy. She asks for a few moments until the next dose and Thredson says that now it's time for the conversion part of the therapy. He brings in a male patient, Daniel, and explains that Daniel was happy to help. Daniel strips naked and Thredson tells Lana to masturbate while touching Daniel's genitalia. She hesitantly does so and then throws up, and Thredson admits that conversion/aversion theory won't work with her.
Jude goes to Monsignor Howard and tells her about the incident with Arden. He tells her that she has to stop her obsession with the doctor and points out that she's relying on the testify of a mental patient who believes that she's Anne Frank. Jude insists that she just wants to protect Briarcliff but Howard knows about her alcoholic relapse and asks if she can handle the pressures of her job. He tells her to think about what he's said and dismisses home. Once he's alone, Howard calls Arden and tells him to dispose of anything that could incriminate him.
Jude meets with her Mother Superior. As they go for a walk, Jude admits that she drank and the Mother Superior believes that God has given her another chance to triumph. She asks if there's more and Jude tells her about Arden and the accusation that he's a Nazi. When she learns that Howard won't pursue the matter, the Mother Superior says that she knows someone who can help Jude and warns against the men in the Church. Jude is reluctant to betray Howard but the Mother Superior says that God has put her on a path and it's up to Jude to clear away any obstacles.
Mary Eunice has a guard take Kit to a cell next to Grace's. He asks why she lied about the murders and Grace explains that her father raped her. When she told her stepmother, the woman gave her candy to keep quiet and did nothing. When her father sold the horses, Grace had enough and took an ax to both of them. She asks if Kit hates her and he says that he admires her.
Thredson visits Lana in the common room and apologizes for his failure to help her. She thanks him for trying and he gives her Wendy's photo. Lana points out that they won't let her keep it and Thredson tells her that she only has to hide it until the end of the weekend. He promises that when he leaves he'll take her with him.
Kit ask to see Jude and asks her if God can forgive him. Jude assures him that God knows all, remembering when she killed the girl in the hit-and-run. Kit mentions the creatures in the woods and then asks for forgiveness, and Jude tells her patient that God will forgive anyone that seek Him out. Kit agrees to confess to the murders if Jude can help him.
Arden takes Anne to the lab and demands to know what she's been saying about him. Anne continues to insist that Arden was at Auschwitz but the doctor dismisses her as a lunatic, pointing out that Anne Frank died years ago. When Anne asks him if he plans to do the same thing that he did to the children at Auschwitz, Arden says that she'll found out. As he locks the door, Anne takes out a revolver that she secretly stole from Connors in the hallway and orders Arden to confess. Something moves in the adjoining room and Anne, startled, turns toward it. Arden charges at her but she turns back and shoots him in the leg. She forces him to give her the key and opens the door, and finds a legless Shelley on the floor, covered in sores and begging for death.