The healthcare industry is undergoing a transformation, and at the forefront of this change is Artificial Intelligence (AI). Personalized medicine, a tailor-made healthcare approach, has gained significant momentum, thanks to advances in AI applications.

Typically, traditional medicine operates on a 'one-size-fits-all' model, which often overlooks individual genetic differences and how they might affect treatment responses. AI applications aim to overcome this limitation by leveraging vast amounts of data to create customized treatment plans. Genetic data, lifestyle information, and even environmental factors are considered to develop a comprehensive understanding of each patient's health.

One of the most compelling examples of AI's role in personalized medicine is its ability to predict health outcomes and diseases before they manifest physically. Predictive analytics powered by AI algorithms analyze trends and patterns in patient data, potentially leading to early diagnosis and preventative care. This approach not only optimizes treatment plans but also significantly reduces healthcare costs.

Major healthcare companies and promising startups are making strides in this area. For instance, IBM Watson Health uses AI to conjure insights from vast healthcare data to help doctors make informed decisions. Similarly, Tempus, a precision medicine company, is innovating how data-driven decisions can lead to more accurate patient diagnosis through genomic testing and analyses.

While the potentials are immense, the integration of AI in personalized medicine comes with its challenges. Concerns about data privacy are at the forefront, as the collection and analysis of personal health data need stringent oversight to protect patient information. Additionally, there's the need for continuous updates to AI systems to keep up with rapidly changing medical research, as well as the crucial time and financial investments in training healthcare professionals to use these advanced tools effectively.

Despite these challenges, the future of AI in personalized medicine is promising. As more healthcare institutions adopt AI applications, patient-centric care becomes increasingly precise and proactive, leading not only to improved patient outcomes but also to a sustainable healthcare system.