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With the increasing adoption of machine learning tools like neural networks across several domains, interesting connections and comparisons to concepts from other domains are coming to light. In this work, we focus on the class of Tensor Networks, which has been a work horse for physicists in the last two decades to analyse quantum many-body systems. Building on the recent interest in tensor networks for machine learning, we extend the Matrix Product State tensor networks (which can be interpreted as linear classifiers operating in exponentially high dimensional spaces) to be useful in medical image analysis tasks. We focus on classification problems as a first step where we motivate the use of tensor networks and propose adaptions for 2D images using classical image domain concepts such as local orderlessness of images. With the proposed locally orderless tensor network model (LoTeNet), we show that tensor networks are capable of attaining performance that is comparable to state-of-the-art deep learning methods. We evaluate the model on two publicly available medical imaging datasets and show performance improvements with fewer model hyperparameters and lesser computational resources compared to relevant baseline methods.