In this episode, Commander Riker has trouble distinguishing between what is real and what is imaginary. Are any of his experiences at the mental asylum real? What about his debriefing with Worf, or the experience with the injured away-team member?
The point at which Riker shatters is the point at which the script indicates that he's re-entered reality. Prior to that (and for the entire episode) he was suffering from an hallucination while under sedation in the small alien room. Everything before that point wasn't real.
INT. ALIEN LAB
Riker bolts awake. He looks around, sees that he is lying on an EXAMINATION TABLE. An alien MEDICAL APPARATUS is above him -- a PROBE is connected to the side of his head at the exact spot where the wound has appeared all along. He is dressed in the Tilonus merchant costume seen in Act One. He turns to see:
INCLUDE - THE ROOM (OPTICAL)
It's a redress of the Asylum Cell -- rigged with various alien medical equipment. The Administrator/Lieutenant is working at a console that displays a GRAPHIC of a HUMAN BRAIN. The mood is different here -- THIS IS REALITY.
From this point onwards, we seem to be back in reality permanently.