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 following is based on Fallout cut content and has not been confirmed by canon sources.
The Vault Dweller was initially supposed to be able to ask for more stimpaks and chems, by passing a mediocre Speech check.