The guy that was Lance King was the guy that got into the asylum. It never says if it was really a dream or if he really did have schizophrenia. The incident was real, his twin with the same name had the dream and was told that he had schizophrenia. So then later when that asylum was abandoned a group of clowns invaded it. BUT not really see here's the twist, the girl seeing them was having hallucinations and hearing voices in her head. So in the asylum she always wore a clown mask that Lance King had surgically put on her. There was so much negativity in this asylum that demons started prowling around in there from underground of course, because of the Paris catacombs. So these investigators while being in the McKamey Manor they set it up in the asylum. They thought that it would bring the demons out but it brought something much worse. It was out looking to consume souls by possessing Hunter.