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Federated learning (FL) has emerged as a transformative paradigm in artificial intelligence (AI) for healthcare systems and analytics, enabling collaborative model training across distributed institutions without direct data sharing, thereby addressing stringent privacy regulations such as the Health Insurance Portability and Accountability Act (HIPAA) and General Data Protection Regulation (GDPR). This narrative review synthesizes the architectural models underpinning FL ecosystems in healthcare, elucidating their integration into clinical analytics pipelines and the privacy trade-offs they entail. We delineate how FL facilitates decentralized AI applications in areas such as predictive modeling for clinical outcomes, medical imaging analysis, and real-time health monitoring, while balancing model utility against data protection imperatives.Central to FL architectures are client-server frameworks where edge devices (e.g., hospitals or wearable sensors) perform local training on siloed datasets, aggregating updates via a central coordinator to refine global models. Variants include horizontal FL for identical feature spaces across institutions and vertical FL for complementary datasets, often augmented with differential privacy mechanisms to mitigate inference attacks. In healthcare systems, these models support analytics for disease prediction, as seen in COVID-19 outcome forecasting, and enable scalable infrastructures for multi-institutional collaborations without compromising patient confidentiality. However, privacy trade-offs manifest in reduced model accuracy due to noisy perturbations, communication overheads in bandwidth-constrained environments, and vulnerabilities to model inversion or membership inference attacks.We explore the landscape of AI-driven healthcare systems, highlighting how FL integrates with electronic health records (EHRs), imaging repositories, and wearable data streams to foster intelligent analytics. Key syntheses include closed-loop systems where AI inferences inform clinical decisions, feedback loops recalibrate models, and governance layers ensure ethical deployment. Challenges such as data heterogeneity across federated nodes and the need for robust incentive mechanisms are critically examined, alongside opportunities for hybrid FL-blockchain integrations to enhance trust. This review posits that optimized FL ecosystems can revolutionize healthcare delivery by enabling privacy-preserving, generalizable AI analytics, but that these systems require interdisciplinary frameworks to navigate trade-offs between innovation and patient safeguards. Ultimately, FL represents a cornerstone for sustainable, equitable AI in healthcare, promoting data sovereignty while accelerating clinical insights.