Currently, they are only taking out the hallway between the basketball courts and the swimming pool. That's being turned into an entrance alley to the hospital.
As for the rest of the building, it will remain until the hospital needs the land for further expansion. There aren't any plans for such expansion right now, and not for the foreseeable future at this point (they're pretty occupied with expansion on the other side of the hospital at the moment). If/when such plans are put into motion, they'll break ground on the second phase of the rec center, which will include more basketball courts along with badminton/racquetball courts and another pool.
That's all info I got from Harry Ostrander, the director of rec services, when I was working on my Field House story last year.
Edit: Speak of the devil^.