Digital watermarking is a technique of hiding specific identification data for copyright authentication. This technique is adapted here for interleaving patient information with medical images to reduce storage and transmission overheads. The text data are encrypted before interleaving with images to ensure greater security. The graphical signals are compressed and subsequently interleaved with the image. Differential pulse-code-modulation and adaptive-delta-modulation techniques are employed for data compression, and encryption and results are tabulated for a specific example.