Did the guy realize in the end that he was crazy? What happened to his family?
Yes, he was crazy or better traumatized.
His daughter fell and died, he killed his wife after that and got them both in the trunk. In his imagination, however, the daughter was still alive and he drives them both to the hospital.
He has only imagined the whole time and takes in the end any corpse from the operating room. At the end you can see the corpse in the back seat and his dead wife / daughter in the trunk