He gives the option of healing Dweller at no cost. However, the Vault Dweller must have an injury and good Reputation to even be treated by the doctor. He refuses his services based upon bad deeds and reputation.
With the Vault technology, he can treat basic injuries, remove radiation and heal crippled limbs. Of course, the more serious the injury, the more time the operation will take.
With low enough Intelligence (less than 4), the medic will give a stimpak every time they talk to him.
The Vault Dweller was initially supposed to be able to ask for more stimpaks and chems, by passing a mediocre Speech check. However, the dialogue that can grant the option to ask for them never appears in-game. The player upon asking for stimpaks again would be redirected to a locker near the medlab's door, however the locker was cut out from the game.