John Murray is sent to Happy Hill after he killed a man who was attacking his girlfriend Lorie Heath, and later destroyed his head with a bat. It is unknown how much time John spent in the asylum, but one day a patient escaped from his cell, managed to get a meat cleaver, and started to kill the staff of the asylum. This allowed John to escape his own cell and make his way out of the asylum.
However, on his way out, both patients and staff members of the asylum started to attack John as soon as they saw him. John can also spot other patients that have not escaped their cells yet. Among these patients are one with his cell's walls covered with news papers and another that has apparently been masturbating for a long time, since there are semen stains all over the wall and bed.
John eventually reaches an area in which he is surrounded by a group of patients, but all of them are easily scared by John. The killer then proceeds to throw chairs at John, and even a couple of meat cleavers. When John reaches an office to get out of the basement, he is confronted by the killer himself. John unarmed has to defeat the killer with his fists (and kicks) alone.
After John defeats the killer, he is able to leave the basement and reach the main building. There are two doors, but one of them is locked. John must enter through the unlocked door to find a way to open the locked one. Two armed security guards surround him in a hallway in the unlocked door, and after defeating them, John enters an area with more cells. Staff, security guards and patients alike launch an attack on him, until he reaches a laboratory in which masked doctors and butchers armed with meatcleavers attack John as well. These butchers have been dismembering and beheading humans, keeping the heads and limbs in boxes. John must break a switch so that the locked door can be opened. On his way up, more guards, patients and doctors attack him.
When John enters the second door, and he finally makes it to the lobby of the asylum, but 15 guards are waiting for him. After defeating them, the Police is waiting for him outside the asylum. As soon as John exits Happy Hill, John is confronted by more cops in the surrounding area, which includes a hotel. John finally leaves the area and goes to Hasselridge's Downtown.