1. A method of mode decision for sample adaptive offset (SAO) compensation of processed video data using rate-distortion optimization (RDO), the method comprising: receiving the processed video data; identifying SAO modes; determining distortion associated with each of the modes according to distortion reduction, wherein the distortion reduction is related to a difference between a first distortion and a second distortion, the first distortion is associated with SAO compensated signal and original signal associated with the processed video data, and the second distortion is associated with reconstructed signal and the original signal associated with the processed video data; determining rate-distortion (RD) cost based on the distortion for said each of the modes; selecting a best mode among the modes, wherein the best mode has a smallest RD cost; and applying SAO to the processed video data according to the best mode selected.