This is obviously quite full of spoilers. Please be careful when reading!
Being ‘severely hurt’ means having less than a quarter of your health left. This is when the game becomes black and white, and your heart beat becomes loud and erratic. As the description reads, you must avoid this state of health throughout the final encounter.
The final encounter comes in several stages. You will initially fight Barry on the bridge heading towards Bird Leg Cabin, though you only need to shine your light on him at this point. From there, Barry will send several waves of familiar faces after you, in the form of speedy Taken (First Hartman, then the Anderson brothers together). Each enemy is accompanied by pesky birds. Since these are speedy Taken, who often keep their distance until you’ve removed the darkness from them, it is possible to focus on the birds initially, as they can whittle away your health fairly easily if left alone. If you have spare flares, they can help you easily deal with the birds. There are ammo crates for the revolver, shotgun and batteries that you can use to stock up when necessary.
A tip that worked for me when needing ammo was to remove the darkness from an enemy, shoot them a few times, and stun them with your flashlight, while moving into position near an ammo crate. This gives you a brief period in which you can restock. After fighting Hartman and the brothers, you will face Barry three more times, with the last encounter being a speedy Taken form. Each ‘wave’, so to speak, plays out the same, so find a way of dealing with the encounter that suits you and stick with it. Just remember; deal with the birds first, then the Taken!