Harry and Kate furtively stash some Christmas decorations as Rosemary walks into the hospital. Harry is very perky but Rosemary is very somber. Her meeting is with the Director of the Western Plains Region Department of Health and she's very worried about the hospital's status getting downgraded because of budget cutbacks. Perce has been out all night celebrating the 50th anniversary of the 2/7th's (Feb. 1943). Bernice is planning to build a wedding pagoda on the land across the street, in the hopes of enticing Japanese tourists to the farm. The meeting doesn't go well...as of this moment, the Wandin Valley hospital has been reclassified as a secondary hospital, meaning no more surgeries. Anna chafes at being referred to as "the wife" in a card from Tom's police pals.

Dr. Gale, the Director of the DOH, comes to the hospital to explain the reasoning behind the reclassification (budget cuts, equipment that needs to be upgraded, bigger hospital nearby). Harry is not in agreement with the whole idea (especially since it means he won't be performing any more surgeries). A little girl, Lottie Bates, is brought in with a broken arm after falling from the monkey bars. Harry wants to operate to put pins in her arm but Dr. Gale refuses. Rosemary dresses him down for hurting their case after Dr. Gale leaves. Anna arrives at the police station to meet Tom. He's not there so she picks up the phone when it rings. It's Killer Burke who insists on referring to her as Mrs. Newman or "the wife" against her wishes. Reg Brundle, a guest of the jail, cheers her when she puts Killer in his place. Bernice is determined to put the pagoda up where Perce doesn't want it. An elderly man is found dead and Bernice and Darcy are sure it's the man (Alfie Roach) Perce said he got into a fight with last night at the celebrations. Hugo brings Reg's dinner to the police station and remarks to Anna that, really, it should be her doing the cooking. She's not impressed.

Rosemary has arranged a meeting with the local member, the hospital board, and the DONs of the other small hospitals. Harry accuses her of giving up without a fight and she sends him home. Bernice talks to Darcy about Perce and Alfie Roach and Perce overhears. He tells them again not to build the pagoda where they're planning but Bernice ignores him. They uncover a skull while digging a post hole. Rosemary has to call everyone who had surgery scheduled. Harry has decided he'll leave if there is no surgical theatre at the hospital. Unfortunately, he just assumes Kate will go with him. Bernice and Darcy avoid talking to Perce about the skull they found. He's decided to play with their minds and does a good job of fuelling their imaginations. Bernice goes to the hospital and talks to Rosemary about the ramifications to the entire town if the hospital should close. Perce and Esme discuss the war.

Tom arrives at the farm to ask Perce about the body they found. He doesn't recognize the picture Tom has. After Tom leaves, Perce comes clean to Bernice. She presses him to explain the presence of the bones and he tells her the story his father told him -- 150 years ago, when the land was being settled for farming, the local Aboriginal community were upset over the loss of the land; the man who had been granted the land where they found the skull had decided to solve the problem by inviting a group of ~50 Aborigines and then slaughtering them. He had hoped all those years that it was just a story and is horrified that it turned out to be true. Jenny Pope gets a drive to the hospital with Esme. She is in early labour. She knows about the closed surgery but won't go to Burrigan. Kate is angry with Harry about making her decisions for her. Jenny starts to bleed and Rosemary thinks she'll need a Caesar...soon.

Jenny has been told she'll have to go to Burrigan. They've called for an ambulance for her. Dr. Robert Wilson arrives for the meeting -- Rosemary forgot to call him to tell him it was postponed -- and Harry whinges to him. Esme talks to Bernice about the hospital and Bernice offers to help Esme conduct a survey of the town. Hugo and Darcy want to borrow the ute but Bernice won't let them -- but Perce won't let Bernice take it either. The ambulance for Jenny will be about 20 minutes. Harry examines her while they wait and determines that the baby is in distress. He decides to perform the emergency Caesar here rather than wait for Burrigan and Rosemary supports his decision. Dr. Wilson offers his help as anaesthetist.

Hugo thinks Darcy should buy a car. Perce offers to help her buy one, as long as he gets final say so. Valmai Winters is having problems with her varicose veins and has an ulcer on her leg. Kate suggests she start walking more, perhaps even taking her dog, Vivien, with her. While conducting the survey, Bernice starts making up comments for people who are not home and Esme is horrified. They talk to Valmai, who is out walking Vivien. Bernice reads out one of her "made up" statements ("Can't sleep at night wondering what will happen to us if the hospital is downgraded") and Valmai agrees -- so Bernice feels justified in including the comment in the survey. Valmai walks near a yard with a large dog and Vivien is bitten slightly (Valmai, on the other hand, is traumatized).

Perce doesn't want Darcy to get a foreign car, prompting Hugo and Darcy to tease him about the war. Hugo offers to share the cost of the car with Darcy and she agrees. Jenny's baby, a boy, is born. He has some problems and they have to send him to Burrigan while Jenny stays at Wandin Valley. Dave, Jenny's husband, wonders if they shouldn't have gone there from the start. Burrigan calls them about the surgery -- no one had informed them that Harry was doing it at Wandin Valley so they sat around waiting. Oops!! Hugo and Darcy look at a car Lennie Sawyer is selling. Darcy's fallen in love with it. Dr. Gale arrives at the hospital. She and Harry argue over the operation. She implies that they put the baby in danger by doing it there and tells them that she's going to advise Dave of his options. Tom takes Valmai around to the neighbours and they come up with a schedule for Valmai to follow for walking Vivien that allows her to avoid all large dogs.

Kate and Harry talk to Dave and he tells them that Dr. Gale advised him to go to the Complaints Unit. He is very distraught but Jenny doesn't blame anyone. Perce comes to look at Lennie Sawyer's car. Lennie says it belonged to his little ole mum and Perce tells them all about her and her stock car racing. Lennie then refuses to sell it. Perce presents Darcy with a lovely old red car (don't know the make or model but it looks like a Holden) and she's over the moon. Hugo is a little upset to learn he's not needed to go splits on the car since it's free to her. The Pope baby improves considerably and is being transferred back to the Valley. Anna looks at Valmai's schedule and remarks about one street on the map...she and Tom rush out and get there in time to find Valmai and Vivien being accosted by a duck. Tom is fed up.

Rosemary gets Dr. Gale to agree that if the hospital can raise the money to replace their outdated anaesthetic equipment, the commission would have to re-evaluate their status. The interim order is lifted pending the review. Later that night, Tom asks Anna what would happen if he got transferred and they agree to toss a coin to decide whose career takes precedence. Hugo decides to move back into Frank's. He puts on a casual face but Darcy forces him to admit that he can't handle her lack of deep feelings for him.