Federated learning (FL) is promoted as a privacy-preserving method for training machine learning models across healthcare institutions without sharing patient data, with growing use in medical imaging, electronic health records, and rare disease research. This critical review examines FL studies from 2017–2024, focusing on privacy guarantees, statistical heterogeneity, communication efficiency, and real-world clinical deployment. A structured search of PubMed, IEEE Xplore, arXiv, and Google Scholar was conducted using relevant FL and healthcare terms, including studies addressing privacy, heterogeneity, communication, or deployment. Reported privacy guarantees are often overstated, with most studies relying on FedAvg without differential privacy. Statistical heterogeneity in non-IID settings remains largely unresolved. Fewer than 5% of studies report real-world deployment, typically at very small scale. A significant gap exists between FL research and clinical application. Current methods fall short of healthcare-grade privacy and real-world constraints, limiting readiness for high-stakes clinical use.
Federated and decentralized machine learning offer the potential to extract valuable healthcare insights from siloed data without requiring the centralization of sensitive patient records, addressing long-standing privacy and governance challenges. This critical review assesses federated learning in healthcare through three lenses: privacy-preserving technologies, incentive mechanisms, and regulatory compliance frameworks. It examines whether the claims in existing literature are substantiated by real-world evidence from healthcare settings. The review reveals considerable enthusiasm for federated learning but identifies gaps, including incomplete implementation of privacy technologies, theoretical incentive mechanisms, and regulatory compliance often assumed but not validated. Additionally, real-world deployments are limited in scale and duration. The review concludes that the gap between federated learning's theoretical potential and clinical application remains significant, with overstated privacy claims and a lack of established frameworks for incentives and compliance.