Recent advances in large language models (LLMs) have demonstrated impressive medical reasoning capabilities. However, current evaluation methods are mostly limited to static case vignettes and multiple-choice questions which fail to reflect the complexity, uncertainty, and iterative nature of real-world clinical decision-making. To bridge this gap, we propose DiagBench, a novel benchmark where models interact dynamically with a LLM based Patient Simulator, querying relevant clinical details to formulate accurate diagnoses. To complement this, we introduce MedConvBench, a diagnostic conversation benchmark designed to assess the relevance and quality of model-generated clinical reasoning. To further address the interpretability and alignment challenges of AI-assisted diagnosis, we develop a modular and medically grounded framework called VAIDYA that mirrors a physician’s stepwise diagnostic reasoning. This structured approach improves transparency and yields substantial performance gains over base LLMs. Our work takes a critical step toward aligning AI systems with real-world clinical practices by combining dynamic interaction, interpretability, and clinical validation.

Deploying Large Language Models (LLMs) in healthcare requires robust performance across two complementary dimensions - diagnostic reasoning: the convergent, evidence-driven task of inferring a patient’s condition from clinical data to produce a diagnosis, and clinical healthcare reasoning: the broader, navigational judgment required to communicate, plan, and adapt across multi-turn clinical interactions where a single correct answer may not exist. Recent benchmarks such as HealthBench and MedXpertQA reveal persistent weaknesses in both areas, exposing failures in complex diagnostic scenarios and limitations in contextual, patient-centered dialogue. We introduce a sequential training framework that targets these facets using synthetic data and rubric-based reinforcement learning. First, we improve diagnostic reasoning using MedBullets-derived questions with rule- and rubric-guided Reinforcement Learning (RL). We then shift to clinical reasoning by generating 5.3k synthetic multi-turn scenarios, each paired with multi-dimensional rubrics to comprehensively assess the response. This approach yields over 10% improvement on MedXpertQA, and our 30B model achieves 50.1% accuracy on HealthBench-Hard, surpassing proprietary baselines including GPT-5 (thinking). Our results show that targeted synthetic datasets and rubric-based training can systematically improve both diagnostic and interactive clinical reasoning in medical LLMs.