In cascade PID control loops as below, can I make an assumption that the inner loop will respond much faster than the outer loop, hence I could simplify U1_CMD as U1 and I could design/tune the gains of the outer loop controller without knowing the details of the inner loop controller or the plant model?
Without knowing ourselves anything about the system you have, it's mostly impossible for us to be able to answer the question.
However, I can say that in general it is certainly possible to consider the inner (stable) control loop to be continuous (namely fast enough) that you could simply consider it part of your system, and run an outer control loop and ignore those dynamics.
I have done this with many current and speed controllers for BLDC motors. They ran a PI controller at 1khz internally, while I ran an LQR controller at 50hz it without issues.
However this doesn't mean that instabilities won't arise, if your outer controller saturates your inner (or vice versa), you're still doomed to instability. You will have to simulate your inner control loop accurately as well as your outer to get an idea if it'll work.
If you can give more of your system info we can help more.