Modern day. Irene is in a hospital talking to a doctor. She doesn't believe that it's 2013, as "Mr. Stapleton" told her it was her birthday seven different times. The doctor explains that Mr. Stapleton was lying. Out in the hallway, Watson can't imagine what Holmes must be thinking. That's nothing new. The doctor comes out and tells Holmes that Irene is fine physically, but she's clearly suffering from severe post-traumatic stress. She was abducted and moved from place to place and subjected to advanced psychological pressure tactics. Someone apparently set out to destroy her personality. The whole time, she only dealt with one man. He left white peonies by her bed sometimes. All she knows is that he was white and about 5'10". She drew a picture of his face, but it's just the clown mask he always wore. The doctor recommends a few days of sedatives.
Holmes says, "It was because of me. Moriarty wanted me to believe that she was dead." And then get addicted to heroin. And when he makes steps toward recovery, Moriarty sends her back. He's been sober a whole year! This timeline doesn't check out. But if Irene is fine, where'd all the blood in her flat come from? Holmes obsesses, "How did I not know that she was alive? What did I miss?" Watson sits next to Holmes on the bench and tells him that Irene has been hurt, but she's alive and can get better. Holmes says he won't be consulting on Irene's case, given that he's too close to it. He needs to look after her. Somebody certainly should, but I'm not sure Holmes is the ideal caregiver. Also, he's decided that Moriarty's smarter than him. He says, "A man should know when he's beaten." He walks away and Watson watches him go.
Holmes and Watson bring Irene to the Brownstone. She'll be staying downstairs, next to the kitchen, and Watson brought her some clothes. They leave her alone while Holmes starts to heat up some water for tea. Holmes exposits that Irene doesn't have any family. His entire plan is "I look after her." He also doesn't want Watson to leave, since he considers this her home as well. That's nice of him. He wants Watson to get to work: "If you're going to find the people who took Irene, you'd better get cracking." Watson is on the Moriarty case alone! She's concerned about this, but Holmes says she'll have Gregson and Bell as backup. Great. The police aren't the total incompetents you get in some versions of Sherlock Holmes, but they're still not ideal. Before Watson steps out, she warns Holmes that this could be a relapse trigger. He feels that he needs to be drug-free to properly monitor Irene. He also says, "My water grows hot. Your case grows cold." It's a great line, and I suspect him of starting the tea just so he'd be able to say it.