Distortion of the cover image by noise due to errors during data transmission is a major concern in telemedicine especially with respect to reversible watermarking. The safe reconstruction of the patient information as well that of the cover image is significant. In the interest of recovering maximum information in noisy environment, reversible watermarking technique using error control codes is employed. This paper presents the effect of salt and pepper noise on prototypical Prediction error expansion based reversible watermarking and proposed prediction error expansion scheme using encoded border embedding for gray scale medical images. The proposed scheme uses (7,4) Hamming codes for conserving the integrity of the cover image as well as the payload in noisy environment. A performance assessment based on Peak Signal to Noise ratio (PSNR) of the extracted watermark and the reconstructed cover image is carried out. Less mutilation of the host image and a better quality extracted watermark in contrast to the pristine method in presence of noise is obtained through the results.