Yes, there's people in the game you can interact with, but the sense of isolation is strong, dare I say just as much as Scratches. There's so few characters, the Hanwell Institute is so vast, and you don't even get to talk that much, so you still feel as if you are alone most of the time. More so, characters come and go, so it's possible you won't see any during several hours.
On top of that, the highest floor of the asylum (pun intended) is completely abandoned, and once you get to that point... well, it honestly feels like the loneliest place on Earth. Just beg nothing happens up there because escape won't be easy. Tee-hee.
In that regard, Asylum feels way more oppressive than Scratches, in a sense that, the further you go, the most difficult it is to leave the building. In Blackwood Manor, it was relatively fast to go outside should you be scared to death.