Reversible image watermarking guaranties restoration of both original cover and watermark logo from the watermarked image. Capacity and distortion of the image under reversible watermarking are two important parameters. In this study a reversible watermarking is investigated with focusing on increasing the embedding capacity and reducing the distortion in medical images. Integer wavelet transform is used for embedding where in each iteration, one watermark bit is embedded in one transform coefficient. We devise a novel approach that when a coefficient is modified in an iteration, the produced distortion is compensated in the next iteration. This distortion compensation method would result in low distortion rate. The proposed method is tested on four types of medical images including MRI of brain, cardiac MRI, MRI of breast, and intestinal polyp images. Using a one-level wavelet transform, maximum capacity of 1.5 BPP is obtained. Experimental results demonstrate that the proposed method is superior to the state-of-the-art works in terms of capacity and distortion.