A cautionary tale on the cost-effectiveness of collaborative AI in real-world medical applications

Federated learning (FL) in healthcare faces pronounced heterogeneity and temporal concept drift across clinical centers, where evolving patient populations and care practices shift data distributions. Existing approaches rely on persistent global communication, incurring substantial bandwidth overhead while risking negative transfer from poorly aligned peers. We propose Adaptive Bayesian Partner Selection (ABPS), a peer-to-peer framework that governs who collaborates, when, and at what cost. Each center maintains a Beta-Bernoulli posterior over prospective peers' Shapley marginal utility, ranks candidates with an Upper Confidence Bound (UCB) criterion, and forms collaborations through a lightweight propose-reject mechanism, with the option to abstain from communication when no mutually beneficial partner exists. The framework admits a stochastic decision interpretation, yielding finite-sample concentration guarantees and O(kappa log T) regret in partner selection, along with conditions under which intentional isolation is optimal under negative transfer. Lightweight extensions (head personalization, bfloat16 quantized communication, and a tunable active-set size) further improve efficiency, and a goal-aware metadata filter enables institution-specific collaboration strategies. On binary in-hospital mortality prediction over the first 24 hours of an ICU stay, with 230 non-IID clinical centers drawn from MIMIC-IV, the full ABPS-X variant matches the strongest federated baseline (FedDyn, AUROC 0.758) at 0.09x the communication cost of FedAvg, with reduced variability. A diversity-driven configuration activates intentional isolation for a substantial fraction of centers. These results show that adaptive, utility-aware collaboration reduces communication without sacrificing accuracy when centers are numerous and small, offering a scalable paradigm for healthcare FL.

Background: Federated learning (FL) enables collaborative training of clinical AI models without centralizing patient data, but adoption is limited by privacy concerns, heterogeneous institutional compliance, and resource disparities; standard differential privacy (DP) applies uniform noise to all clients, penalizing well-compliant or under-resourced institutions. Objective: We introduce a compliance-aware FL framework that adapts DP to institutional compliance, letting lower-compliance sites participate without uniformly penalizing others. Methods: A compliance scoring tool aligned with HIPAA, GDPR, NIST, ISO, and HL7/FHIR maps each client score to a per-step Gaussian noise scale for server-side DP-SGD on a small aggregator dataset. The formal $(ε,δ)$ bound applies to the aggregator dataset under a semi-honest aggregator; client-level DP needs secure aggregation (future work). We evaluate five FL strategies on PneumoniaMNIST and BreastMNIST (16 clients, 50 rounds, five seeds); the cumulative aggregator-dataset $ε$ is about 1434 (Breast) and 513 (Pneumonia) at $δ=10^{-5}$. Results: Including 12 lower-compliance clients (Experiment 1) versus a compliant-only baseline (Experiment 4) changed BreastMNIST accuracy by +4.5 (FedAvg), +6.8 (FedMedian), +5.2 (FedProx), +1.6 (FedYogi), and -4.1 (FedAdam) percentage points (pooled +2.8 pp; not significant at n=5; up to +17 pp per configuration); compliance-weighted allocation matched uniform server-side DP at equal mean noise (+0.1 pp), carrying no utility penalty, and first-round noise cost 1.3 pp (Breast) and 2.5 pp (Pneumonia, FedAvg). Conclusions: Compliance-weighted server-side DP lets lower-compliance institutions join FL without degrading performance, giving auditable per-site noise control at no utility cost; formal guarantees apply to the aggregator dataset, with client-level DP requiring secure aggregation.

Federated Learning (FL) enables collaborative model training across distributed healthcare institutions without centralising sensitive patient data. However, real-world healthcare federations are often characterised not only by non-IID data, but also by heterogeneous clinical objectives and partially overlapping feature spaces. Different hospitals may optimise distinct and potentially conflicting objectives, such as mortality risk prediction, readmission reduction, or length-of-stay estimation, while also retaining institution-specific clinical features that cannot be shared with other participants. Existing personalised FL methods mainly address statistical heterogeneity, whereas multi-objective FL approaches typically learn a shared global model without explicit client-level adaptation. To address these limitations, we propose \textbf{FedCARE}, a multi-objective personalised FL framework for smart healthcare services. FedCARE follows a two-stage training strategy. First, it learns a shared global backbone from common clinical features using Pareto-driven multi-objective federated optimisation. Second, each client independently fine-tunes the shared backbone using its private features and local clinical objectives, enabling institution-specific personalisation without additional communication overhead. We implement FedCARE in a cloud-based client-server federated deployment on the Melbourne Research Cloud and evaluate it on two real-world healthcare datasets, MIMIC-III and Diabetes 130-US Hospitals. Experimental results show that FedCARE consistently outperforms standard FL, multi-objective FL, and personalised FL baselines, achieving up to 12.5% AUROC improvement and 32.0% MAE reduction over FedAvg.