Summary
Teddy and Chuck change into fresh clothes and enter a meeting where Cawley is arguing with Naehring and others over how best to accommodate the facility's patients during the storm. Naehring and others believe that the patients should remain shackled, but Cawley is worried they may die. Teddy interrupts the meeting and asks Cawley about the second half of the message found in Rachel's cell—"Who is 67?"—after noticing that Ashecliffe's total number of patients is 66.
Cawley assures Teddy that there is no 67th patient, and tells him that Rachel has actually been found. In her cell, accompanied by Cawley and Chuck, Teddy asks Rachel what she did yesterday, using the sighting of a "known communist subversive" as a pretext for the question. Rachel recalls her former life in the Berkshires—making breakfast for her husband, sending her children to school, and swimming in the lake. She becomes emotional and hugs Teddy, whom she calls "Jim," and then enraged when she realizes that Teddy is not her late husband.
Back in Cawley's office, Cawley tells Teddy and Chuck that his men found Rachel skipping stones near the water's edge. As thunder rages outside, Teddy suffers another migraine and collapses in one of Cawley's armchairs. Alarmed, Cawley offers him medicine and a cot to lie down in for the night. Teddy briefly observes a warden who looks like a military official before drifting off to sleep, where he dreams of once again being in Dachau, walking amid frozen corpse piles. Teddy finds the corpse of a woman who looks like Rachel, frozen to the corpse of a young girl, who tells Teddy that he should have saved them all.
Still dreaming, Teddy once again finds himself in Cawley's chambers, where he sees a badly scarred Laeddis sitting near the fireplace. Laeddis lights a cigarette for Teddy and offers him a flask of liquor, implying that Teddy "needs" it. Laeddis suddenly morphs into Chuck, who tells Teddy that they are running out of time. Teddy hears a piercing scream and looks to his left to find Rachel covered in blood, with three children laying dead at her feet. Rachel asks Teddy for a hand, but Teddy tells her he could get in trouble. He lifts one of the dead children, a small girl, and apologizes for not saving her. Suddenly near a lake, with Rachel still at his side, Teddy lowers the girl into the water, next to two other floating corpses. As Teddy watches the girl sink, Rachel calls the scene "beautiful."
Teddy seems to jolt awake in his cot while the storm rages, but realizes he is still dreaming when a soaking wet Dolores enters the room. She once again tells Teddy that Laeddis is "still here," and that he must be killed. As Dolores consoles Teddy, he wakes up in earnest to find the orderlies in a state of panic over a flood in the generator room. Teddy and Chuck walk outside and see that the power outage has short-circuited Ashecliffe's electrified perimeters and security doors. Chuck suggests that they use the opportunity to visit Ward C.
In Ward C, a warden tells Teddy and Chuck that most but not all of the patients have been rounded up. While exploring, a hairless, emaciated patient "tags" Teddy, who chases after him through the darkened halls. The patient attacks Teddy from behind and drags him behind a caged wall. He tells Teddy he does not want to leave, and begins explaining the physics of a hydrogen bomb. Teddy gains the upper hand and begins choking the patient before Chuck breaks them up. The warden catches up with the group and scolds Teddy and Chuck, taking the patient away to the infirmary with Chuck. Using a match to explore the rest of the darkened ward, Teddy observes several patients in their cells, and hears someone whisper the name "Laeddis."
Teddy follows the voice and comes upon a patient whom he suspects is Laeddis and demands to see his face, before realizing that he is in fact George Noyce. Noyce accuses Teddy of inflicting his scars, and tells Teddy that his investigation is fake, and that he is in fact trapped in a "game." Noyce points out that Teddy has not been unaccompanied since arriving at Ashecliffe, and had never met his partner before. A tearful Noyce tells Teddy that he will soon be taken to the island's lighthouse and lobotomized. While the men are talking, Teddy once again imagines that Dolores is present, urging him to tell Noyce about her locket. Noyce tells Teddy he has to let Dolores go, but when Teddy maintains that he cannot, Noyce tells him that he will never leave Ashecliffe. Noyce explains that Laeddis is not in any of the wards, leading Teddy to believe he is being kept in the lighthouse.
Analysis
The interview that Cawley orchestrates between Teddy and a nurse who is play-acting as "Rachel Solando"—although designed to provoke Teddy into breaking through his delusions and acknowledging his repressed memories—fails. The nurse mentions several details from Teddy's former life, when he was a U.S. Marshal named Andrew Laeddis living in the Berkshires with his wife Dolores Chanal. Her allusions to sending the kids to school and swimming in the lake anticipate critical plot details revealed in the film's denouement, a flashback in which Andrew arrives home to find that Dolores has drowned their children.
Cawley's statement that they found Rachel near water is a reference to how Teddy found Dolores the day his children died. Teddy's psychological "defense mechanisms" grow more powerful after his encounter with the first Rachel Solando, causing him to dream once again of his dead wife Dolores and a scarred man he imagines to be Andrew Laeddis. Scorsese's direction imagines how Teddy's repressed traumatic memories begin to blend together in surreal ways, such as when a corpse at Dachau morphs into the image of his dead daughter.
Although his delusion prevents him from piecing together the actual relationship between Rachel and Dolores, Teddy's dream imparts several significant details about the traumatic circumstances of his family's demise. Scorsese uses water and water imagery—such as the presence of the intense rainstorm, itself later revealed to be a product of Teddy's imagination—to symbolize the intrusion of tragic events from his past. Water appears again and again, such as when Teddy dreams that Rachel is near him next to a lake, and when Dolores appears dripping wet in his hallucinations.
Teddy and Chuck's journey into Ward C, housed in a Civil War-era military fort, is also a glimpse into the historical and iconographical past, when the mentally ill were often dismissed as prisoners to be confined and kept from society. The unnamed Ward C patient's allusion to the way hydrogen bombs implode is yet another reference mid-century historical atrocity, this time not about Nazi Germany but instead about the United States's use of thermonuclear weapons on Japan.
Teddy fails to realize that the patient he eventually finds in Ward C, George Noyce, has severe scars that Teddy himself inflicted after Noyce referred to him as "Laeddis." Like Solando's interview, Noyce's warning that Teddy's investigation is fake also fails to have the intended effect, but does make Teddy grow rightly suspicious that his partner Chuck is conspiring against him with Ashecliffe employees.
