George Pillari, Grandfather of Hospital Quality Ratings Too Young for the Title

At 46, George Pillari shrinks from being called the "grandfather of hospital quality rankings."

After all, he was an undergraduate student at Johns Hopkins University and working at Hopkins' Center for Healthcare Finance and Management when he and two of his professors, Carl Schramm and Steven Renn, launched HCIA in 1985. Mr. Renn and Mr. Schramm eventually left the company. "I was the one dumb enough to drop everything and work there fulltime, the first real job I ever had," Mr. Pillari chuckles.

HCIA became a healthcare data gathering and collection company that produced the first quantitative 100 Top Hospitals ranking.

Mr. Pillari, now the managing director with turnaround company Alvarez & Marsal's Healthcare Industry Group in San Francisco, says he worked for HCIA for 15 years.

"I stayed with the company and we wound up getting tremendous support from enlightened executives at Ambac (an early owner) and acquired some assets from McGraw-Hill," he says. "We looked up one day and saw we were a company with $30 million in annual revenues. We went public in 1995 did several public offerings and sold off Ambac's ownership stake. We had talented people like Dr. Jean Chenoweth (who has remained with the company.) We institutionalized the products across hospitals and insurance companies and pharmaceutical firms and got in early as a trusted resource."

Mr. Pillari concedes that U.S. News & World Report was first to produce hospital ratings systems. "They came out with what I call soft rankings. The first five or six years it was mostly opinion gathering and general impressions and didn't use much data," he says.

"We hit the market in around 1994 and ours was purely quantitative calculations based on objective data," Mr. Pillari says. "U.S. News was a much different product when it first came out. After we were doing this five or six years, HealthGrades came out with some good products employing a lot of people who used to work at HCIA. And U.S. News began to add more quantitative data. And a whole industry began cropping up."

He says HCIA applied quantitative measurements using outcomes and financial data. "The '100 Top Hospitals' was the first to nail that with a matrix of financial and quality data that ranked the hospitals," he says. "We thought we could create a defensible study calculation every year that left little room for opinion. We knew a lot of people might not like the results. A lot of hospitals that were not in the top 100 were publicly perceived to be among the best hospitals. But they either didn't have financial performance or the quality indicators. We got some blowback. But most of the hospital industry, rather than saying this is garbage, wondered how they could get in next year. They asked how they could improve. We were ready for an avalanche of criticism. All we got a snowstorm. And it became the gold standard. It's become almost ridiculous now, everywhere you look there's somebody doing a hospital ranking. A lot of others joined the fray."

He says there was no way to patent the process, which he characterized as a team project that also partnered with William Mercer Co. "But it held up very well for 15 years and hospitals look for it and use it in their marketing to improve their performance," he says. "We did something right."

For awhile, HCIA was a darling of Wall Street. "We had a good thing going, a great company with a great set of people and an interesting national customer base across healthcare, but we were a publicly-traded company subject to the vagaries of the public markets."

He says problems began after pharmaceutical industry distributor McKesson acquired healthcare information company HBO in 1998 and federal investigations followed. (In 2005 McKesson paid $960 million to settle class action lawsuits.)

"There were all kinds of allegations of fraudulent accounting there and with HBO the largest capitalized company in our space coming under scrutiny, public investors fled the healthcare information sector," Mr. Pillari recalls. "We thought it could be years before people would really care again about investing in healthcare information companies again. And if the public market didn't care and the whole sector was viewed as a problem, it would be futile. So we had a healthy auction and put it up for sale."

He says the firm changed hands several times before it eventually wound up with Thomson Reuters.

After the sale Mr. Pillari moved to Silicone Valley to launch a healthcare claims and benefits processing firm, CBCA. Mr. Pillari served as CEO of CBCA, which he sold in 2004.

Two years ago he joined the San Francisco office of turnaround firm Alvarez & Marsal.

"I was able to put together everything I learned about governance boards and dealing with investors to good use at Alvarez & Marsal," Mr. Pillari says. "We usually do operational and debt restructuring. I'm now dealing with boards and lenders and investors. Maybe someday I'll get back to the widgets."

Healthcare insiders say that Pillari has made his mark on the hospital industry, dating back to when Ernst & Young named him a "Young Healthcare Entrepreneur of the Year" a decade ago.

David Felsenthal, a leader in the healthcare valuations industry and an owner of Principle Valuations in Chicago, calls Pillari "a very innovative man who understood how to work within the Medicare environment and secure quality information which hospitals around the country purchased to improve their performance."

Mr. Felsenthal says he first met Mr. Pillari more than 20 years ago when he was exhibiting at seminars run by the former accounting and consulting firm, Arthur Andersen. "He had the backing of one of the country's largest audit firms and was the first to do qualitative hospital rankings," Mr. Felsenthal says. "Those didn't exist then and it changed the industry. Today they're commonplace."

Michael Sachs, chairman and CEO of Sg2 Health Care Intelligence, a Skokie, Ill.-based healthcare consulting company, who partnered briefly with HCIA, briefly partnered with Mr. Pillari.

"George is a visionary entrepreneur, a very focused, strong operator in building and operating companies," Mr. Sachs says. "He's a very bottom-line oriented and value-based leader who built a good team at HCIA who have gone on to do other positive things. He took the company public, sold it, and very successfully created value."

He describes Mr. Pillari as a man with a sharp sense of humor who doesn't mince words. "You know what you're going to get with George."

Mr. Sachs says Mr. Pillari "was the first guy who really created and conceptualized a hospital data company that was a commercial success. To a large extent, he created that component of the industry. He was there at the beginning and clearly this is his legacy."

He says the "Top 100 Hospitals" early on included many investor-owned hospitals, which drew skepticism within the industry. "But as more tax-exempt hospitals began seeing the ratings, the list took on a life of its own," he says. "And as greater transparency and quality became more important, the HCIA/Solucient rankings played a big role in offering benchmarks and goals for hospitals to aspire to. At the time, it was a pioneering move."

He says within the hospital industry, the Solucient "Top 100 Hospitals" remain widely watched and followed and comprise a key element of Thomson Reuters, the company that eventually acquired HCIA/Sachs, later known as Solucient. The Thomson Reuters "100 Top Hospitals" remains a popular and respected brand name.

"If it weren't for George, this probably never would have happened," Mr. Sachs says.

While Richard Wade, vice president of the American Hospital Association, says he doesn't personally know Mr. Pillari, he says the hospital rankings firms like HCIA/Solucient, HealthGrades and others stimulated greater transparency and encouraged hospitals to track quality outcomes.

"They played a role in making the data more available. HCIA/Solucient approached this from a business standpoint and drew people within the field to look at their rankings and compare their overall performance," Mr. Wade says. "Consumers didn't always understand it, but it was well watched within the industry."

He says it's difficult to rank institutions, which sometimes confuse the public, but points out that it has led to the Hospital Quality Alliance and CMS's Hospital Compare, which have made the information more consumer-friendly.

"HCIA/Solucient has given something useful to hospitals and their work offered the public some inkling of which hospitals were doing the right things and doing them well," Mr. Wade says.

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