Dr. Dan Potter is the replacement for Dr. Harry Merton, a psychiatrist at Dr. Leo Bain's psychiatric haven. Dr. Bain operates the haven through very lenient methods. The 3rd floor patients (paranoid former POW Frank Hawkes, pyromaniac preacher Byron "Preacher" Sutcliff, obese child molester Ronald Elster, and homicidal maniac Tom "Bleeder" Skaggs) initially treat Dr. Potter with mixed hostility. The men on the 3rd floor wake up and begin to carry out their plan. After Hawkes successfully creates a blackout, Sutcliffe and Elster kill Curtis and the four escape in a doctor's car. They drive to a store in the middle of a raid to pick up new clothes and weapons. Skaggs then slashes an innocent bystander and runs away, the others take the murdered man's van and drive off. Dan arrives at the hospital to learn from Bain about the four escaped patients and of the people they killed.
The babysitter Bunky arrives at Dan's house during the blackout and invites her boyfriend Billy to have sex. After hearing a noise, Billy is dragged and killed underneath the bed by Preacher, and Bunky is strangled by Ronald. Dan arrives home with Nell, Toni and Tom (who unbeknownst to the family and the viewer, is the fourth escapee) when they see cops all over the house. Lyla is fine as she told them about Ronald, but the police haven't found out about the murdered Bunky and Billy. During dinner, Barnett is killed by Hawkes' crossbow and he attacks the family. With the phone line out, the family then barricades the windows from the crossbow bolts. Meanwhile, Bain is told by the telephone operator that the phone line to the Potter residence is out of order, causing him to drive over to the house where he is slashed and axed by Preacher. Dan tries to scream to the men outside and tells them that he did not murder Dr. Merton, but he gets no reply. Suddenly, Barnett's dead body is thrown by Ronald through a window, and the group stacks furniture against it as Hawkes shoots his crossbow through the broken window. Preacher sets a fire in the basement, prompting Dan to the basement where he injures Preacher and extinguishes the fire. After doing this, Ronald attacks the group before getting killed by a meat cleaver.
While Dan starts up Bain's car, Tom's nose bleeds (revealing his identity to the group) and strangles Toni. Dan runs back inside and grabs Tom away from his sister and Nell stabs Tom, killing him. Suddenly, Preacher comes out of the basement and Dan struggles with him, where he manages to stab Preacher and throws him back into the basement. As Dan, Nell, Lyla and Toni gather together for comfort, Hawkes appears standing in the kitchen doorway with his crossbow aimed right at them and cities "It's not just us crazy ones who kill". Suddenly, the electricity comes back on and Hawkes sees Dr. Merton interviewed in a news report on television. Evidently upset, Hawkes breaks the TV and leaves the house and escapes into the night. Hawkes then walks through the town and enters the club. While Hawkes watches the punk rock band perform, a drugged girl walks up to Hawkes where he pulls out his pistol and points it at her neck. She looks at it and laughs, and so does Hawkes.

Question: Why did Dan go to the basement?
Answer: Bryon set the basement on fire. 
Alternative answer: There was a fire.