The episode starts with a Johnny (Dylan McDermott) talking to the therapist about his compulsion. He used to enjoy killing and skinning small animals as a teenager, and looking for the origin of his dark desires, he found out that his real father was Mr. Thredson a.k.a. Bloody Face. So he now tries to live up to his dad by skinning women (he started with Teresa, but the process wasn't flawless, as Johnny Thredson had no medical practice). Long story short, he kills the therapist and probably her secretary as well.
Jude opens her eyes and like Lana in the first episode, she finds herself tied to the bed. Mary Eunice, the Monsignor, Dr. Arden, "crazy Santa" and even Mother Superior - all testified against her, claiming that she was mentally ill and killed Frank. So, Judy is back at the Briarcliff but as a patient. Poor thing. Above all people she knows it's not a great place to be in.
Lana learns that she's pregnant and Mary Eunice is determined to make her have the child. So Ms. Winters has to get creative: she steals the coat hanger and performs an abortion herself. Then she turns to Kit to convince him they need to kill Thredson now that they have a chance, but yet again, he wants to get his confession first. So Lana comes up with a plan: she tells Oliver she's pregnant and gets the confession out of him which Kit managed to record. Then with a great satisfaction Lana tells Thredson that the baby is already taken care of, and that he's next on her murder list.
Kit hides the tape in the bathroom, and that's where he's found by Dr. Arden, who is acting suspiciously friendly. Arden says he saw the aliens and that he thinks they might come and save their subject, Kit, if anything would seriously threaten his life. So he suggests to try to almost kill Kit and see if the little green men show up. Obviously, he gets a green light.
Timothy finds Leigh "praying" in the church. After a conversation with the psychopath, who is acting all enlightened, he once again thinks that if he "saves" this person, he might get a ticket to Rome. So he uncuffs a very dangerous criminal and baptizes him in a large bath with water. Little did he know about the true intentions of Mr. Emerson: the next moment the Monsignor is drowned in the bath and the next time we see him he's crucified. That's when the Angel of Death pays him a visit.
Lana fails to steal the knife, so she decides to finish Thredson with the coat hanger, but it's too late: Bloody Face is gone! So she looks for him and finds Mary Eunice instead. Lana quickly realized that Sister set the serial killer free and confronts her. But the devil delivers some bad news: the baby is not dead and it's a boy!
Jude enters the common rest room as a patient for the first time. She goes directly to Lana and apologizes for what's she's done to her. She promises Ms. Winters she'll help her get out of the institution, but Lana trusts no one. So to show that she's willing to earn her trust, Judy breaks the record with that annoying song "Dominique".
Dr. Arden stops Kit's heart and naturally, the white light is immediately all over the place. Arden enters one of the wards and finds Grace, alive and very pregnant, and Pepper, talking like a sane person.
So, what do we have? Aliens are "refining some sort of eugenics", if we can believe Dr. Arden. They also are capable of bringing humans back to life and curing idiocy. I guess, there's not much left to this story, I mean, now we know that these creatures are real, don't we?
Bloody Face of 2012 claims to be Dr. Thredson's son. I don't know if it's that easy to find info about your real parents in the internet, but let's assume it's true, since it's kind of confirmed by Lana's pregnancy. The fact that Johnny knows that Thredson was Bloody Face must mean that the world will learn the truth about Oliver, right?
Judy and Lana seem to form some sort of alliance, which seems promising, though it's hard to say where this is going.