Applied Radiology

On May 1, 2007, Eastman Kodak Company (Rochester, NY) sold its Kodak Health Group to Onex Corporation (Toronto, ON). The new, independently run corporation, now known as Carestream Health, Inc. (Rochester, NY), instantly became one of the largest health imaging and information technology (IT) companies in the world, with an expected $2.5 billion in annual sales, operations in more than 150 countries, and more than 8,000 employees.

Carestream's Chief Executive Officer, Kevin J. Hobert, recently spoke with Applied Radiology about this new company and its plans for the future.

Applied Radiology: Now that the transition is complete, what is the first order of business?

Kevin J. Hobert: Our first order of business is to get back to running the business. We are putting together a Board of Directors. We've brought in a number of functions for which we had previously relied on Kodak, such as logistics, finance, and IT. We are making sure that we are taking care of our customers. We are looking at aggressive plans to grow the business.

AR: What is the nature of the relationship between Carestream and its new parent, Onex Corporation?

KH: Carestream will be managed as an independent company. Robert M. Le Blanc, the Managing Director for Healthcare for Onex, is going to be the Chairman of the Board. So there will be a lot of interaction with him. I and our Chief Financial Officer, Michael Pomeroy, will sit on the Board along with a number of other independent directors. Through this, we will interact quite a bit with Onex. They have a lot of great ideas for us, and they have extensive experience in mergers and acquisitions. So, we're going to them all the time right now to get advice and ideas, and we're using them as a sounding board for our growth plan.

AR: Will this independence change the way the company is able to run?

KH: Absolutely. Everything that we do in terms of strategy development and investment will no longer be evaluated and weighed against another business unit. Instead the questions will be: What is the return? What is the opportunity? Are we creating value for customers? Are we creating business value? If the answer is yes, then we will move forward rather than having to evaluate ideas within the overall context of a larger company. We no longer have to trade off our opportunities against other opportunities within the company.

AR: Will the company headquarters remain in Rochester?

KH: We do business in 150 countries around the world, and our revenue is spread out around the world. We have a portion of our employees based here in Rochester and many of our business units are headquartered here, and we'll maintain that. We are doing some upgrades to the facilities, many of which are just to separate utilities and other things that are shared across several buildings within the Kodak complex.

AR: How will this change in corporate structure affect customers?

KH: Our customers can expect the same level of service and commitment that they have had from us for the last 110 years. Nothing is more important to us than our relationships with our customers. I think that this change will result in a net benefit to our customers because we are embarking on a more aggressive growth strategy for the company that will involve enhancing and expanding our portfolio of products and truly investing in this business. We've been investing in research and development (R&D) over the last several years at a very high rate, but now we have even more tools and opportunities to drive growth.

AR: How are the business units organized within Carestream?

KH: The basic business units are the medical market and the dental market. We are the number-one dental film provider worldwide, and we have the largest installed base of dental digital imaging equipment and dental digital radiography. We also have the largest installed base in the world of dental practice management systems. In addition, we manufacture and sell a number of other imaging technologies such as intraoral cameras. So serving the oral healthcare market is one part of our business.

On the medical side, we provide solutions designed to help our customers move from film and paper to an all-digital workflow within imaging departments and to improve the cost and quality of care through this transition. We offer all of the analog film products. We're the number-one provider of analog film in the world. We offer printers and the film that goes with them. We offer products that replace film in imaging departments-computed radiography (CR) and digital radiology (DR) products-and we offer IT products that help to convert imaging departments to digital, such as integrated radiology information systems (RIS) and PACS, storage solutions, information management solutions, and professional services to help our customers implement this technology and get the results that they are looking for in terms of cost and quality improvement.

We also have molecular imaging systems on the medical side of the portfolio. We are focused mainly on optical molecular imaging, serving the research and preclinical healthcare market.

AR: Do you foresee medical imaging becoming truly filmless and paperless?

KH: It's hard to say that anything will actually become paperless, but I've heard people say that the most dangerous item in the hospital is the pen. The trend is toward the digital exchange of information and certainly toward digital imaging. Digital technology provides many benefits in terms of improved access to care, better cost of care, more integrated care, and the ability to take all the data that is currently in various file cabinets and systems around the hospital and bring it all to the care provider. I do see a time when healthcare will be filmless. But paperless? Probably

not. The data will be stored electronically and exchanged electronically, but people may always print to paper for easy display and sharing of data.

AR: What is the role of film today in medical imaging?

KH: Film provides a really nice system solution. With a relatively inexpensive processor and film, you can capture images, display them, store them, and share them. It's a low-cost solution that doesn't require a lot of training or infrastructure. So as countries around the world are growing and building their healthcare systems, a lot of them are using film. In emergent parts of the world, we want to find ways to develop cost-effective solutions, training, financing, and everything else needed to implement these systems so that they can offer better access to care.

There are also many customers out there using film because, to date, it has been difficult to find the value proposition that can lead them to digital. We've been developing digital solutions for years, and they are getting better and better. The standards are in place, and the costs have come down. Benefits are proven now in cost and quality, so our goal is to lead customers away from paper and film to an all-digital workflow.

Film is an important part of our business, but we want to provide our customers with the best possible solutions, so we are investing only in developing digital solutions for our customers.

AR: Kodak had been instrumental in China's Million Women Breast Cancer Screening Project. Will Carestream continue that?

KH: China is expanding access to healthcare at a rapid pace, and they are building their first mammography screening programs. We are providing film, film processors, CR systems, storage solutions, and training to help China expand mammography screening. We have been working with the Ministry of Health and the government of China to ensure that the program is successful.

AR: Will we continue to see the Kodak name in medical imaging?

KH: Absolutely. We have access to the Kodak name, and we will be using it in our products. Our company is no longer the Kodak Health Group, but we sell Kodak digital imaging products and have full access to the brand.

AR: What would you say is the overall mission of Carestream Health?

KH: Our stated vision is "to change the landscape of healthcare for future generations by providing solutions that dramatically improve the quality and cost of care" and "to build the value of our business through a passionate, customer-driven global team." We want to transform the future of healthcare and enable our customers to improve the quality and cost of the care they provide. We want to grow the value of our company with a dedicated team focused on the needs of our customers.