My med school has a five-tiered grading system: honors, high pass, pass, low pass, fail, making a GPA out of 4.0. However, we aren't ranked against each other. We also don't get our exams curved, so the grades reflect only what you know, not what other people know. I feel like this is nice because it motivates students (if they want the higher grades) but doesn't make competition in class. All competitiveness is internally driven, which is the way I think it should be.
Anyway, I feel like good students with pretty good GPAs will stand out inherently, and the rank is not necessary. If someone gets through med school with a 3.8 (meaning almost all honors and a few high passes), residencies will probably take notice. And if you were wondering, no, not everyone at my school gets good grades - the averages on our exams are usually in the high 70s or low 80s, which would usually be right on the border between high pass and pass.
One possible solution that doesn't involve ranking is something my high school did. We weren't ranked then either, but the school published a list of all the courses in the school and the grade distribution in the course, so college admissions officers could get a general (but not precise) idea of where the student stood with respect to the rest of the class.