The Mount Massive Asylum Incident was an event that took place a few hours prior to the start of the original story, and is witnessed firsthand from the very beginning in the DLC, Outlast: Whistleblower. It resulted in the downfall of the Murkoff Corporation.
The cause for the incident was the inhumane experiments conducted on the patients; the Morphogenic Engine testing augmented the patients' strength, but caused severe physical deformities and drove them more insane than they already were. After Billy Hope gained control of the Walrider, he used it to begin slaughtering all of the Asylum staff. In the ensuing chaos, many Variants escaped and they too began wreaking homicidal havoc in their extremely unstable states of mind. The security forces attempted to quell the attacks and stop the inmates but ultimately failed, losing the facility to the Variants. Murkoff's Tactical Division was dispatched but most of them were killed in their attempts to retake the asylum. Not only did the experiments take effect on the patients but the Murkoff staff as well - a notable example being Dr. Richard Trager, who worked for Murkoff and whose personality was affected by the illegal treatment on patients.
Many of the patients that escaped started to freely roam the asylum with no set purpose. Some patients took on a sort of religion and started to worship The Walrider, thinking that it was a god. These variants became followers of Father Martin, who was attempting to release The Walrider into the world. Chris Walker, another escaped variant, was trying to prevent this from happening, as made evident by the ramblings from the other patients.
Many of the staff and security forces were killed during the slaughter by The Walrider and by the Variants themselves. The two protagonists of the game attempt to evade these threats and expose the Murkoff Corporation for its illegal treatment towards the patients. However, although it seems as even the workers themselves are insane for even agreeing to Murkoff's terms, not every staff member was pleased by the experiments conducted on patients. Waylon Park, a software engineer at Mount Massive, emailed journalist Miles Upshur to expose its secrets, but took matters into his own hands after being put through the Morphogenic Engine Program.