Karen (Karen Beriss) is the ghost killing them off.
She was one of the "Crazy Eights" when they were hospitalized together and the friends accidentally killed her by leaving her in a box when they were trying to escape. The subject of the experiments they were all being subjected to was "guilt". To get rid of their guilt they must rid themselves of the objects that bind them to Karen. They try to destroy the toys that were in the box with Karen's body.
Although Karen kills everybody but Jennifer (Dina Meyer), Jennifer gathers up all the toys and burns them in a trashcan, but that doesn't work. She realizes that she's the last thing that binds them all to Karen and so she kills herself.
At the very end, we see a young girl looking at two boxes in front of her while the doctor tells her that one box is painful, but leads to salvation and the other box leads to more tests. She has to choose a box. The next shot is of an empty chair the girl was sitting in.