The 1-2-5 has shut down to celebrate Ray Carling's birthday with a rowdy party, complete with drinking and carousing with prostitutes who had been released for the occasion. Annie convinces Sam to dance with her, so he jumps on a desk and gives his best Michael Jackson impression, which delights the crowd, who begin chanting "spaceman".
Sam wakes up groggy with a hangover the next morning to the sound of a ringing telephone... apparently from his mother in 2008. He hers her tell him she will turn off his life support at two o'clock if he doesn't give her a sign. Sam yells into the phone to tell her not to turn it off, but she can't hear him. Gene enters the squad room, wakes up the detectives, and tells them there is a hostage situation at Memorial Hospital.
When the squad arrives, the hospital is in chaos, so Gene takes charge and begins to give orders. He is advised that a man armed with a shotgun has seized a surgeon named Dr. Schwahn and is holding an undetermined number of patients hostage, and he is demanding a surgical nurse and an EEG machine. If his demands are not met by two o'clock, he will kill the hostages. Sam mentally connects the earlier call from his mother to this current crisis, and believes he can send a sign to his mother by preventing anyone from dying during the standoff. Gene Hunt has other ideas on how to deal with the situation, but allow Sam to try it his way.
Sam calls the hostage-taker in the hospital. He is astounded when he learns the man on the other end of the line knows his name – the connection is lost. Sam tries to dial the number again, but there is no answer. In the meantime, Annie and Chris have learned that Dr. Schwahn performs lobotomies and the hostage-taker had signed himself into the hospital as Michael H.
Before Sam can act, he sees Ray and the other officers arming themselves and preparing to overtake the hospital. Gene Hunt gives Michael H one last warning through a bullhorn. As Ray signals the armed officers to move toward the hospital, Michael H begins shooting into the street and the officers return fire. Desperate to prevent anyone from being shot, Sam tosses his badge and gun to Annie, and runs into the parking lot with his hands in the air. The shooting ceases as Sam is able to persuade Michael H to allow him to enter the hospital.
When Sam locates the psychiatric ward and enters the room, Michael H tells him that Dr. Schwahn, who is gagged and locked in a cage, had once treated his brother Johnny for schizophrenia by using a procedure that had fried his brain. Michael H is demanding the EEG machine so Dr. Schwahn can undo the damage. Gene calls Michael H on the phone to tell him they are sending in the machine, and then asks for Sam. As soon as Sam picks up the receiver, Hunt begins a diatribe against his rash actions, but Sam cuts him off and speaks in code. He lets Hunt know the number of hostages by telling him how many are all right and he relays which side of the building they are on by mentioning the sun is shining on him - meaning the east side. He is able to tell Hunt they are in the psych ward by saying Michael H. is "no psycho." Hunt understands and acts accordingly.
In the ward, Michael H reveals to Sam that he is wearing a bomb vest. He leaves the room and locks in the hostages. One of the patients, Erica, approaches Sam and introduces herself as a newspaper reporter who is working undercover to research mistreatment of psychiatric patients. When Sam asks her where Michael H keeps going, she answers "South of the Slot," but her description is gibberish.
As he looks around to find a way to escape the ward, Sam eyes a television that is airing a soap opera. He is shocked to see Maya on the screen as an actress. He approaches the television cautiously to get a better look and watches as the soap opera doctor tells the soap opera Maya to let her comatose boyfriend go. Then soap opera Maya notices a twitch in her boyfriend's hand and she asks if it's really him. Sam hollers in desperation at the television that he is indeed there, but she cannot hear him.
Dr. Schwahn has removed his gag. When Sam confronts the doctor and admonishes him regarding the inability of curing Johnny, Schwahn defends his work. He tells Sam that Erica is not a reporter; she is a patient whose delusions had led her to kill her family. Schwahn believes his work is necessary due to his patients' fantasies, such as time travel and parallel dimensions. They believe radios or televisions are communicating with them, which usually ends tragically. Sam is affected emotionally by these words.
Michael H returns and unties Schwahn's hands so he can operate on Johnny. An orderly grabs a scalpel from the tray and lunges at Michael H, who shoots him. Desperate to keep the orderly alive, Sam performs CPR on him. This enrages Michael H and he knocks Sam out with the butt of his shotgun.
When Sam wakes up, he sees Annie, dressed as a nurse, and Gene Hunt, dressed as an EMT, inside the psych ward. After confirming that Sam is all right, Gene tells Sam his plan. There are three thirty-eights hidden in the EEG machine. When his men rush the ward, they will shoot Michael H before he can detonate his bomb vest. Hunt's plan is thwarted after Michael H places the machine inside the cage and locks it.
Annie retrieves the janitor's key that she had stashed in her bra and gives it to Sam so he can leave from the ward. Sam plans to climb out an unbarred window he had seen earlier. However, Sam is confused because the window is no longer there. Apparently, the window had been a hallucination and there is a closet packed with explosives instead. A scream is heard from the from the psych ward.
Michael H has found the weapons in the EMG machine and has removed the bomb vest and has placed it on Annie. He then forces Sam to call Ray with his list of demands: a bus, a plane, and a pilot.
Later, Annie and Sam are handcuffed to a bed and she is no longer wearing the bomb vest. She relates to Sam about a schizophrenic she knew who was able to live normally by clinging to a happy memory he was sure was real. Sam tells her the first time he met Maya was his happy memory, and it had made his life worth living.
Michael H has chained Gene, Sam and Annie to a radiator in an operating room. Dr. Schwahn tells he plans to manipulate the EEG machine so it looks as though he has operated on Johnny successfully. Michael H enters, wearing the bomb vest, and tells Schwahn to proceed with the surgery. Before the doctor begins to drill into Johnny's skull, Sam yells for him not to do it, and then tells Michael H the surgery will not work. Michael H becomes enraged and attacks Sam. Gene and Annie beg him to stop, but he keeps beating Sam until Dr. Schwahn finally admits that Sam is right. The surgery will not work.
Annie is forced to tape up the hands and mouths of all the hostages, clothe them in identical lab coats, and place pillowcases with eye holes over their heads. Sam is then dressed in Michael H's jacket and a shotgun is taped to his hands. Michael H places tape on Sam's mouth and pulls a ski mask over his head, and then dresses himself and Annie in the same garb as the other hostages. Before leading everyone out of the ward, he yells, "See you all South of the Slot."
As the disguised hostages leave the building and walk toward the waiting bus, police snipers open fire on Sam, believing he is Michael H. Gene and Annie act quickly to protect Sam by covering him with their bodies. When Ray sees this, he orders the men to hold their fire and removes the masks from Hunt, Annie and Sam. The officers then remove the pillowcases from the heads of the hostages, and realize that Michael H and Johnny are not in the group. Gene Hunt orders everyone to evacuate, but Sam runs back inside the hospital.
Back inside, Sam races down a corridor underneath the hospital and finds Michael H and Johnny. Michael H tells Sam his plan had been to demolish the hospital to create a distraction while he and Johnny fled to Canada. Sam had ruined his plan, so the new plan is to blow up himself and his brother. A nearby clock ticks closer to two o'clock. As Sam steps between Michael H and the switch panel on the bomb, he hears voices from his 2008 hospital room about turning off his life support. As Michael H aims his pistol at Sam and pulls back the hammer, Sam closes his eyes and mentally sends himself back to 2007 to relive the moment when he first met Maya. The memories make him smile, and he hears a disembodied female voice say, "He's smiling."
As Sam opens his eyes, the clock ticks past two o'clock. Michael H is staring at his brother, Johnny, who is smiling. The detectives rush in and shoot Michael H, but not before he shoots Gene in the chest, who opens his shirt to show the men that the bullet had hit a flask in his pocket.
Ray: Holy cow! What are the chances?
Gene: Actually, pretty good. (Gene pulls out two more flasks) I didn't know how long this hostage crap was going to go on.
On his way home, Sam glances into a store window and sees a television that is displaying the same soap opera he'd watched at the hospital. He stares transfixed as the mother refuses to let the doctors near her son because she had seen him smile. Annie walks up as Sam is watching, and he thanks her for helping him remember a happy moment during the hostage crisis. She turns and enters a bar and turns to watch him walk away. Before he leaves, Sam sees the real Maya on the television. She is crying and telling the man lying in the hospital bed that she can't do this anymore; that she has to leave him. Sam isn't upset. In fact, he feels happy when he sees Annie through the window of the bar. The name of the soap opera is flashed on the television as their eyes meet: Life On Mars.