1. A method of mode decision for sample adaptive offset (SAO) compensation of processed video data using fast rate-distortion optimization (RDO), the method comprising: receiving reconstructed pixels of the processed video; receiving original pixels of original video; identifying SAO modes; determining distortion reduction associated with said each of the SAO modes based on a difference of first mean squared error between SAO compensated pixels and original pixels of the original video, and second mean squared error between the reconstructed pixels and the original pixels, wherein said determining the distortion reduction is calculated based on the difference between the first mean squared error and the second mean squared error without computing a squared reconstructed pixel term or a squared original pixel term; determining rate-distortion (RD) cost for said each of the SAO modes, wherein the rate-distortion (RD) cost is computed based on the distortion reduction associated with said each of the SAO modes; selecting a best SAO mode among the SAO modes, wherein the best mode has a smallest RD cost; and applying SAO to the reconstructed pixels according to the best mode selected.