This is the first episode that we learn what happened to Danny's parents. It was established in other episodes that he was raised in the foster system after being orphaned. Danny tells Clare that his parents were arguing in the car when they were driving somewhere when he was 11. His father was yelling at his mother and Danny wanted him to stop, so he said something and his father turned around to yell at him. Because of this the car started to swerve.
The set of the mental institution is also used in Teen Wolf (2011) as Eichen House, also a mental institution.