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To me, there are a couple things to work out to bring this to life - the PCs angle, and why the NPCs are creating this machine.
How do the PCs end up there - do they receive a tip-off, a letter, a commission from someone with a missing relative to find out what's going on? Perhaps your second doctor could be feeling bad about what's going on (perhaps the nurse is blackmailing them into silence?) and reach out to the group? Are the players going to go in openly, get jobs there, or even pretend to be mad to gain access? One way you could also get them in as part of an ongoing campaign would be to have one of them sectioned there as a result of a previous session.
Beyond that, what is the motivation for making the machine - a cult, personal gain, a desire to punish those seen as abnormal? Knowing why this is being done would let you know how it's being undertaken and how characters might react when challenged.
Lastly, there's some scope here for some really cool set pieces - being stuck on an island they can't get off, chased by unspeakable creatures, finding the farm and working out if they can trust the people inside, desperately signalling from the lighthouse in a storm for help. There's a good bare bones here, just think things through and add some flesh to them. You might also find some inspiration in One Flew Over The Cuckoo's Nest and Shutter Island, set in an asylum/prison island respectively. I'd love to know how the game goes!
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