After being named interim chief, Derek begins to settle into his new position but faces a lawsuit when Bailey and Meredith's patient wakes up during surgery. Meanwhile, Teddy refuses to let Cristina be a part of her service, Alex continues to work with Arizona in pediatrics, and Mark avoids talking to Lexie who is still heartbroken over their break up.
Derek confronts Richard over his alcoholism in an attempt to help his friend and the hospital. Izzie returns to reconcile with Alex, and tensions between Teddy, Cristina and Owen escalate.
Mark flies Addison to Seattle so that she can help perform a difficult procedure on his pregnant daughter. Meanwhile, Owen begins to question Teddy's motives when she has Cristina be the lead on a complex surgery; and Derek becomes suspicious when the Chief has Meredith assist on a high-profile operation.
As the holidays come and go, Miranda has a surprise visit from her father, William, who has a strong disapproval of her choices in life. Mark and Lexie must cope with a person who re-enters Mark's life, and Thatcher Grey questions the Chief's behavior, but Meredith is quick to come to the Chief's defense.
Owen recruits Dr. Teddy Altman a former Iraqi veteran, as the new cardiothoracic surgeon, Cristina questions her abilities in the E.R. and relationship with Owen. Izzie returns to Seattle Grace with her high school mentor seeking treatment for his dementia. Richard's responsibilities, post-merger, are taking a toll on him.
A generous 25 million donation is offered to Seattle Grace by the parents of Arizonas 10-year-old patient, she finds herself in a conflict of interest when his condition worsens. Cristina tests her boundaries with Owen at the hospital. Alex is left with all of Izzies hospital bills to contend with.
When the hospital lab tech, Isaac, discovers he has an inoperable tumor wrapped around his spine, he turns to Derek for help; Derek challenges Richard's authority.
After a burn victim unexpectedly dies in the midst of a chaotic ER, the Chief and board member Jennings interrogate the residents to find the culprit, as all the Mercy West and Seattle Grace resident defends their actions in an effort to save their jobs.
The residents of Seattle Grace and Mercy West vie for surgeries and their careers as day one of the hospital merger begins. Meanwhile, Arizona stands by an enraged Callie when her father, Mr. Torres, employs a priest to help convince her to date men, and Izzie experiences the brunt of her new surgical competition.
When Meredith and Lexie's father, Thatcher, returns to the hospital with a failed liver, it's up to Meredith to save his life. Meanwhile, Izzie empathizes with a patient riddled with tumors, as Mark, annoyed with Cristina's competitive zeal, tricks her into assisting on an unusual surgery.