Empire Health Services, of Spokane, has decided to move forward with $12.5 million in construction projects during the next two years.


Garman Lutz, interim president and CEO of the nonprofit operator of Deaconess Medical Center and Valley Hospital & Medical Center, says work could start as early as January on the previously shelved completion of an expansion at the Deaconess Health & Education Center building.


Empire put work at that building on hold last year, after being unable to secure financing in light of an $18 million net loss for 2002, but the hospital provider has posted a $5.3 million net gain through the first nine months of this year and thereby restored confidence in its creditors, Lutz contends.


They feel well be able to sustain positive performance, he says.


Consequently, Lutz says, U.S. Bank is in the process of issuing a letter of credit that Empire needs to seek $35 million in bonds from the Washington Health Care Facilities Authority. The bonds likely will be issued in December, he says.


In January, then-Empire CEO Tom White had said the organization expected to be in a good enough financial condition to move forward with a bond issue by the end of the first quarter. Empire continued to struggle through the first two months of the year, however, and cut employee pay organizationwide by 9 percent in early April. White resigned in July.


Empire has avoided losses for seven straight months, Lutz says, due to increased patient volumes, better insurance-reimbursement rates in some instances, and cost-cutting measures, including the pay cut, 2.25 percent of which was reinstated last month.


About $22.5 million of the expected bond proceeds would pay off a construction line of credit that Empire tapped to fund improvements at Valley Hospital and the first part of the expansion at the Deaconess Health & Education Center (DHEC), which is just west of the main hospital building.


A portion of the remaining $12.5 million would go toward interior construction in the top four floors of the DHEC building. Those floors, which so far have remained just shells, will be used for cardiac services and physician offices. Before that expansion was put on hold, Empire disclosed plans to move all of its inpatient, outpatient, and educational services related to cardiovascular care into that space and market those services as the Deaconess Heart Hospital. Lutz now says, however, that Empires board and strategic planning team still are working to determine precisely what services will be housed there and how much those improvements will cost.


A handful of additional projects that would start in the next two years are in the planning stages, but Lutz declines for now to disclose details about those projects. Such work would be paid for out of the balance of the $12.5 million not used on the DHEC building.