Digital health exhibits at CES last month were up 40 percent, a figure that gives strong credence to the notion that the health-tech space is red hot.

Another clue: Apple is developing a health product--at least that's the prediction Rock Health chief strategy officer Malay Gandhi recently made. In a blog post, he pointed out several things: the iPhone is loaded with sensors, Apple CEO Tim Cook is on record as saying the sensor space "is going to explode," and the company has recently hired a cadre of medical-device experts--not to mention the fact that the iPhone 5s employs a coprocessor designed to monitor physical activity.

If anyone knows about health-tech innovation, it's the folks at Rock Health, a San Francisco seed accelerator for digital health-related startups backed by a handful of Bay Area VC firms, the Mayo Clinic, and Harvard Medical School, as well as corporate behemoths GE and United Health Group.

Want in on the fast-evolving health-tech scene? Here's where to focus, Gandhi says.

Health Care Reform

Even though the rollout of Healthcare.gov has been rife with failures, it doesn't change the fact that the Affordable Care Act is responsible for the most radical upheaval of U.S. health care in history. Whereas health insurance used to be primarily a B2B model, in which health-insurance companies sold policies to employers, now it's a retail marketplace in which they're marketing to individual consumers who value service and a high quality, frictionless experience.

Think about how you use your smartphone for services--everything from Uber to OpenTable. There's nothing like that for health care, Gandhi says. "We think that's creating a huge, huge opportunity for startups as the market fundamentally shifts towards a retail business-to-consumer market. We think there's opportunity to reinvent that whole chain from buying insurance to selecting a doctor."

Wearables and Biosensing

The cost of hardware is plummeting rapidly, making it easier to create devices that can help people understand the human body like never before. Unlike traditional health care, which is episodic and oriented around acute care, using sensors on or in the body allows for continuous monitoring of human health.

"Getting so many more frequent data points on everything from cell-free DNA to any blood metabolites or anything else should really create a new opportunity for research and development and diagnostic therapies, as well as treatment and early intervention," Gandhi says. "What we wonder about is how you can be a company that does everything [from] material science and biochemistry all the way up through a compelling user experience where people really want to wear and use your device and app."

And while many digital entrepreneurs worry about FDA regulation, Gandhi says Rock Health researched the subject and found as of last March around 100 "mobile medical apps" had been reviewed by the FDA, all of which were Class I or Class II devices with the average time it took the FDA to review them only 67 days.

"Yes, it's a process. It does in fact cost money and you will want to probably use experts, either you hire them or you use consultants. It's not a thing that is meant for someone who has never done it before," Gandhi says. "You need to collect data, which can be lab data or human data, but it is absolutely 100 percent surmountable. It is not this challenge that's impossible and the timing of it is not that long. The FDA doesn't drag their feet on these things."

The Big Data of Omics

The efficiency of genetic-sequencing technology has evolved at an exponential rate, even outpacing Moore's Law. Whereas less than a decade ago decoding a human genome ran around $250,000, last month DNA sequencer maker Illumina announced its HiSeq X Ten system which can sequence the genetic code of a human cell for a mere $1,000.

"We think of this area, what's known as omics--so genomics, proteomics, metabolomics, microbiomics," explains Gandhi. "The sequencing of all this data and information about ourselves [is] the fundamentally largest big data problem that humanity has ever seen. We're talking about multiple terabytes per human genome, and then you start getting into sequencing our microbiomes, our proteomes, the tumors that might be living inside of our bodies, and we see this as a very significant big data challenge."

The opportunity for startups then, he says, is in creating the products and services that live above the sequencers--think platforms and dashboards that will allow researchers, pharmaceuticals, clinicians, and consumers to better understand sequenced information.

"It starts as a pretty significant data problem of how do you ingest all that data and make it useful, but it enables so much more to be done in terms of new therapies, new diagnostics, and a new level of understanding about ourselves," Gandhi says.